The importance of remaining invested
The perils of missing the best days
When markets are volatile, it is often tempting to exit the market or switch to cash in an attempt to reduce further expected losses. However, it is impossible to time these movements correctly as no-one has a crystal ball to predict future movement, so being out of the market for just a few days can have a devastating effect on returns.
Using global equities as an example, the chart below shows how missing just a few of the best days can have a big impact on returns.
Over the last 25 years, an investor making an initial investment of £10,000 and staying in the markets throughout that period could have a potential return of nearly three times greater than that of an investor who missed the best 25 days.
NB: Past performance is not a guide to the future. The value of units may fall as well as rise.
Source: Quilter Investors as at 31 December 2019. Based on an initial investment of £10,000 into the MSCI World Index over the period 31 December 1999 to 31 December 2019. Gross return in pounds sterling. The information provided is for illustrative purposes only and doesn’t represent the past performance of any particular investment. It is not possible to invest directly into the MSCI World Index.