A $10,000 investment in an S&P 500 fund 20 years ago grew to around $82,300 with dividends reinvested.
Without the fund's 10 best days, that investment finished at around $35,700.
Seven of those 10 days came within two weeks of one of the fund's 10 worst days.
The S&P 500 (SNPINDEX:^GSPC) closed at a record high earlier this month. It isn't cheap, either, trading at around 26 times earnings versus a 10-year average of about 24, according to FactSet. (Measured against the next 12 months' expected earnings, it's in line with its 10-year average.) With stocks near a record, it may be tempting to step aside for a while and plan to buy back in after the next drop.
But the past 20 years show how costly that plan can get. By my math, $10,000 put in the State Street SPDR S&P 500 ETF Trust (NYSEMKT:SPY) on Oct. 12, 2006, was worth around $82,300 by Oct. 12 this year with dividends reinvested.
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Take away the fund's 10 best days, though, and the same $10,000 finished at around $35,700. These 10 days, out of more than 5,000, cost about 57% of the ending value.
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I picked the State Street fund, which tracks the S&P 500, because it was the first exchange-traded fund listed in the U.S. (it started in January 1993), so it has a full 20 years of daily prices. Both numbers are from the same series of closing prices, adjusted for dividends.
Showing how much these few days mattered, the fully invested $10,000 compounded at around 11% a year. Without the 10 best days, the annual return drops to under 7%. Without the best 20, the ending value falls to around $21,500. What's more, someone who missed the best 40 days finished with about $9,900, or a little under the starting investment after two decades.
The fund's 10 best days didn't come in good times. Six of those came between October 2008 and March 2009, during the financial crisis. Three more came in March and April 2020, while the pandemic was shutting down much of the economy. And the last was April 9, 2025.
Every one of them arrived with the fund at least 18% off its previous peak, and nine of the 10 came with it down over 25%. These were rebounds in the middle of deep declines.
The best day in the 20 years was Oct. 13, 2008, when the fund soared 14.5%. Two days later, it lost 9.8%, which was one of its three worst days in that span. The fund dropped 9.6% on March 12, 2020, gained 8.5% on March 13, then dropped 10.9% on March 16 -- its worst day in the two decades.
In all, seven of the fund's 10 best days came within two weeks of one of its 10 worst.
In April 2025, the fund slid around 12% over four trading days as investors worried about new tariffs. Then President Trump announced a 90-day pause on some of them, and the fund climbed 10.5%. (The index itself gained 9.5%, because a fund's closing price can drift a bit from its index.)
Of course, nobody misses exactly the 10 best days and nothing else. An investor who somehow skipped both the 10 best days and the 10 worst finished with around $84,300, or a little more than the one who never sold. The two groups of days mostly cancel out.
But I doubt stepping aside usually works out so neatly. After all, the urge to sell is arguably strongest just after a sharp fall -- and the largest gains have tended to come right then.
Anyone who sold the fund at the close on April 8, 2025, after the four-day slide, and bought back a month later wound up around 12% behind an investor who sat tight.
Even Warren Buffett didn't claim to know the timing. In a New York Times op-ed from the same week as the fund's best day in October 2008, he wrote that he was buying American stocks but couldn't predict where the market would be in a month or a year.
Yes, a fund like this can drop a long way from a record. The $10,000 was worth around $5,200 at the bottom in March 2009. But the 11% annual return included holding through that, and the best days were mixed in with the worst.
All told, I wouldn't sell an S&P 500 fund just because its valuation looks high or a stretch has gotten scary. I don't see a reliable way to dodge the bad days without also missing some of the best ones.
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Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.