This Is the Thing About the Stock Market That Should Really Scare You

Editors' pick: Originally published Aug. 4.

How many times have you heard that "It's not about market timing, but time in the market?" It's a classic line delivered by investment salespeople every day.

And the thing is, it's true.

Buying low and selling high is incredibly hard to do consistently over time. Staying invested in the market, whether through an ETF, a mutual fund or a well-diversified portfolio of individual stocks, is one of the best ways to make money over time.

Some investors don't stay invested because they're afraid of big market losses. But the bigger concern should be missing out on the best performing weeks.

Missing the Highs

To see how much missing a market's best performing weeks can affect your overall returns, we looked at the weekly performance of the MSCI Asia ex Japan Index since 1988.

The MSCI Asia ex Japan Index has had 1,489 trading weeks since January 1988. Over that time, its average annual return was 5.8%, or 0.11% a week. That's a 400% accumulated return (not including dividends) since 1988.

The table below shows what would have happened if you had been invested all 1,489 weeks but missed some of the best-performing weeks.

Missing the best performing week (the week of February 6, 1998, when the index gained 13.6%) would have earned you 60% less in accumulated returns than what you could have earned if you were invested for all 1,489 weeks. (That's partly the result of that 13.6% weekly gain compounding over time.)

An investor who was invested for 99.7% of all weeks -- meaning he missed just the best five trading weeks -- would have earned about 200% since 1988. That's a drop from a 5.8% annual return, to a 3.9% annual return.

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