Time in the Market: What History Tells Us About Investing During Volatile Markets

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Thus far, 2025 has been a challenging year for investors. Pullbacks in the US and other stock markets due to tariff policy and the fear of trade wars have cost investors dearly over the first 2 quarters. Some dermatologists may see this increased volatility and be fearful of what comes next. They might even consider selling their investments and “going to cash.”

An emotional reaction to a stock market decline is natural, but as we hope to show you in this short article, reason should rule the day. Fortunately, we have decades and even centuries of data to call upon when looking at market downturns, which can be helpful to calm even the most worried physicians. In fact, we often come back to the short adage that summarizes what history tells us when it comes to investing: “Time in the market beats timing the market.”

Timing the Market

Let us begin with the opposite concept: attempting to “time” the market by buying before run-ups, selling somewhere near the top, and then buying back in once prices have come down. In essence, market timing means selling assets when one thinks the market will continue to decline and then buying back in when it feels safe that the market has bottomed out. This may sound enticing in theory.

In practice, however, the evidence is overwhelming that most investors diminish their long-term returns by trying to employ a market timing strategy. They are more likely to chase the market up and down and be whipsawed by buying high and selling low. Market timing, although tempting, involves getting 2 nearly impossible decisions right: when to sell and when to buy back in.

Figure 1

Figure 1 shows that the 15 best days for the S&P 500 (through December 31, 2023) all occurred within bear markets, not in bull markets as you might expect.¹ In other words, the best days to be in the market have been when it is hardest to remain invested or most tempting to exit the market and wait for better days. Looking at these dates, you will find the “who’s who” of dark times for the stock market: the 2008 financial crisis, the dot-com crash, and the Black Monday crash of 1987. A handful of these best days happened in the first quarter of 2020, during the onset of the COVID-19 pandemic.

This trend continued in a recent market pullback in spring 2025. In the midst of a significant downtrend in April, the S&P 500 index had one of its highest 1-day returns ever on Wednesday, April 9, 2025—a 9.5% rise.

Damage of Missing Days

Missing just the 10 best days in a 20-year period can have a significant long-term effect on a portfolio. For example, an investor who invested $10,000 in the S&P 500 in 2003 would have finished with a portfolio value of more than $64,000 (as of December 31, 2022) if they had remained fully invested. However, the portfolio value for an investor who missed the 10 best days is much lower: less than $30,000. Of course, the results worsen as more of the market’s best days are missed. In fact, returns on the portfolio were almost entirely eliminated if the investor missed just 30 of the market’s best days in the 20-year period (Figure 2).¹

One does not necessarily need a 20-year period to experience the lost opportunity from missing just a few trading days. In fact, the concepts illustrated in Figure 2 were well defined in the single year between January 1 and December 31, 2020. For example, a portfolio valued at $1 million on January 1 would have been reduced to $695,730 at the market’s lowest point on March 23. If no withdrawals were made throughout the year, the portfolio’s balance on December 31 would have reached $1,184,000. For this hypothetical portfolio, exiting the market at its low point vs remaining invested all year would have resulted in the difference between a 30.4% loss and an 18.4% overall gain.² Of course, it is unlikely an investor will miss only the best days if they attempt to time the market. They might also be able to miss some of the historically bad days. However, the cautionary tale of attempting to time the market is the same: There can be an enormous cost to pay if the market swings to the upside while you are on the sidelines. It would take a crystal ball to enter and exit the market perfectly, particularly because it needs to be done in short order given the market’s best and worst days tend to cluster close to one another. Investors should also be aware of the tax implications associated with selling assets in an attempt to time the market.

Figure 2.

Timing a Reentry Point

When an investor experiences losses beyond their acceptable threshold, the temptation to abandon the current strategy intensifies. Every investor is likely to lose money in their lifetime. A key to success is avoiding the urge to lock in losses when times appear the bleakest. Cashing out your investments can be costly because the recoveries are often sharp and swift. Once the news is positive, a sizable portion of the gain is likely in the rear-view mirror. Missing the bounce may teach an expensive lesson.

The powerful data illustrated by Figures 1 and 2 are the reason astute investors do not engage in all-in and all-out strategies. Timing the market once is difficult, but timing it twice is nearly impossible.

Time in the Market

By encouraging you to spend “time in the market,” we mean for you to adhere to your long-term financial and investment plan. Although this may mean adjusting allocations (and thus selling and buying portions of a portfolio), the key is that the actions are taken with a long-term view and time horizon. Rather than trying to predict what will happen in the market tomorrow or next week or even next year, you invest for long-term financial goals, such as children’s education or retirement, which can be decades away. In doing so, you can benefit from the long-term upward trends of markets rather than the up-and-down bumps and dips along the way.

David Mandell, JD, MBA, is an attorney and author of more than a dozen books for physicians. He is a partner in the wealth management firm OJM Group.

Adam Braunscheidel, CFP, is a partner and wealth adviser.

They can be reached at 877-656-4362 or mandell@ojmgroup.com.

References

1. Morningstar data and analytics. Morningstar. Accessed April 29, 2025. https://www.morningstar.com/business/brands/data-analytics
2. YCharts database. YCharts. Accessed April 29, 2025. https://ycharts.com/