Justifying the superiority of buy and hold by removing the highest winning days
One argument that I have seen thrown around to validate buy and hold, or that old saying that time in the market is better than timing the market, is this:
If you stay out of the market for just 10 days, but these 10 days end up being the highest winning days in the period, you will massively underpeform.
Taking this literally, I did a study (asking chatgpt to provide me the data for the 10 highest winning days since Jan 1st 2010) and got the following for the S&P 500:
Rank Date % Gain Closing Value
1 09/04/2025 +9.52% 5456.9
2 13/03/2020 +9.29% 2711.02
3 24/03/2020 +9.38% 2447.3
4 26/03/2020 +6.24% 2630.07
5 06/04/2020 +7.03% 2663.68
6 17/03/2020 +6.00% 2529.19
7 10/03/2020 +4.94% 2882.23
8 02/03/2020 +4.60% 3090.23
9 09/08/2011 +4.74% 1172.53
10 26/12/2018 +4.96% 2467.7
The S&P 500 returned 416.86% in the period, or (very lazily calculated) about 11.18% per year. Without those 10 days, the return would have been 171.43%, or 6.65% per year. A lot if you ask me.
I hope you guys noted the same as me, how unlucky this investor was, to lose only the 10 highest winning days. What if he had a counterpart who was lucky and "lost" the 10 losing days, and only that?
Rank Date % Loss Closing Value
1 16/03/2020 −11.98% 2386.13
2 12/03/2020 −9.51% 2480.64
3 09/03/2020 −7.60% 2746.56
4 04/04/2025 −5.97% 5074.08
5 11/06/2020 −5.89% 3002.1
6 13/09/2022 −4.32% 3932.69
7 29/04/2022 −3.63% 4131.93
8 05/05/2022 −3.56% 4146.87
9 13/06/2022 −3.88% 3749.63
10 18/05/2022 −4.04% 3923.68
He would have got 867.60%, instead of 416.86%, or 15.77%. Big outperformance!
Now, what about a third investor who, by trying to time the market, stayed out of it for 20 days, the 10 best days and the 10 worst days?
He would have performed a bit worse than the market, but very close: 408.13%/11.06% cagr.
My point is not to go in favor, or against, people who buy indexes to hold them "forever", but to show how much BS arguments get thrown out there, and worse, get repeated by people who seem incapable of stopping for just 10 minutes to think by themselves.
2 Replies
https://www.hartfordfunds.com/practice-m...
"Avoiding the market’s downs may mean missing out on the ups as well. Seventy-eight percent of the stock market’s best days have occurred during a bear market or during the first two months of a bull market. If you missed the market’s 10 best days over the past 30 years, your returns would have been cut in half. And missing the best 30 days would have reduced your returns by an astonishing 83%. "
Interesting that an investor would have stayed out of a bear market and the first 2 months of a bull market, missing only the best 10 or 30 days.
If max return is all I cared about then I would obviously buy and hold a Nasdaq ETF and let software eat the world over time.
Is software done eating the world? Obviously, it is just starting.
Personally, I care about much more than max return. I want the most juice for the squeeze but managing your own portfolio is like a part time job. I can completely understand why a person would want to hire a money manager and not bother with it or just DCA.
Those statistics are all nonsense and not understanding ergodic theory.
