"Time in the market, not timing the market"

"Time in the market, not timing the market." It's a timeless lesson that we're taught at an early age and that advisors preach to their clients regularly. The beauty of this simple lesson is that we have troves of data to show the impact of an equity investor staying fully invested. Specifically, the impact on your total return when you are not invested during the best-performing days and the stock market's sneaky history of recovering following major price declines.


Over the last twenty years, if you were invested in the stocks of the S&P 500 but missed the ten best market return days, your average annual return before fees would have been cut in half – from about 7.5% to 3.5% annual return. In dollar terms, for $10,000 invested over that 20-year period, you would have missed out on $22,500 of return ($19,898 versus the $42,478 had you been fully invested). It's also important to note that many of these "best days" come during periods of stress in the markets, when some investors may have pulled out of the market in hopes of timing the bottom.

Risk of Trying to Time the Market

The impact is more severe if you miss more of these "best days". Missing the best 30 days over the last twenty years would have resulted in negative portfolio returns.

Rank chart


With the benefit of time, recoveries and bull markets have made the short-term "crisis events” appear insignificant, far outpacing the value lost in the draw down over longer periods of time. Trying to time your entry at the market bottom is a difficult task and often results in a losing proposition with more risk. Similarly, trying to time an exit at market's peak – even by a matter of a few days early or late – can take significant value from your portfolio's potential.

Bull market bear market

While hindsight is 20/20, you probably planned for market turbulence in your risk assessment. Staying invested ensures that you are not missing out on the short-term benefits of the “best days” or the long-term benefits of bull markets. Whether the bottom is behind us or we are in the midst of a bear market rally, we hope you find this perspective valuable in your investment portfolio conversations.

“Madison” and/or “Madison Investments” is the unifying tradename of Madison Investment Holdings, Inc., Madison Asset Management, LLC (“MAM”), and Madison Investment Advisors, LLC (“MIA”), which also includes the Madison Scottsdale office. MAM and MIA are registered as investment advisers with the U.S. Securities and Exchange Commission. Madison Funds are distributed by MFD Distributor, LLC. MFD Distributor, LLC is registered with the U.S. Securities and Exchange Commission as a broker-dealer and is a member firm of the Financial Industry Regulatory Authority. The home office for each firm listed above is 550 Science Drive, Madison, WI 53711. Madison’s toll-free number is 800-767-0300.

Any performance data shown represents past performance. Past performance is no guarantee of future results.

Non-deposit investment products are not federally insured, involve investment risk, may lose value and are not obligations of, or guaranteed by, any financial institution. Investment returns and principal value will fluctuate.

This website is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Please consult with your financial advisor to determine your risk tolerance and investment objectives. While Madison constructs portfolios for various risk tolerances, it does not determine individual client’s risk tolerance or investment objectives.

Equity risk is the risk that securities held by the fund will fluctuate in value due to general market or economic conditions, perceptions regarding the industries in which the issuers of securities held by the fund participate, and the particular circumstances and performance of particular companies whose securities the fund holds. In addition, while broad market measures of common stocks have historically generated higher average returns than fixed income securities, common stocks have also experienced significantly more volatility in those returns.

The above numbers are mathematical examples only, do not consider the any potential losses avoided through a timing strategy and do not reflect any Madison product or strategy. Actual results may vary.

Indices are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only, and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance.

The S&P 500® is an unmanaged index of large companies and is widely regarded as a standard for measuring large-cap and mid-cap U.S. stock-market performance. Results assume the reinvestment of all capital gain and dividend distributions. An investment cannot be made directly into an index.