Chart of the Month – June 2024

No one can time the market and determine when those best months will occur. The best months are surprisingly random. More important than timing the market is time in the market. 

The Power of the Few: 8% of Months Define S&P 500 Success

There’s an adage that time in the market is more important than timing the market. That’s almost always true!

The long-term return from stocks (S&P 500, since 1926) is about 10.3% annualized, or a little over 7% after adjusting for inflation. Most of the time, the stock market doesn’t do a whole lot. Every once in a while, the stock market rewards your patience.

I looked at the 1,180 months of S&P 500 returns from 1926 through April 2024. Sorting the monthly returns from worst to best reveals that the worst 1,081 months, or ~92% of the total months, cumulatively result in a 0% return! That means the remaining and best 99 months (8% of the total) account for all of the positive return.

This is illustrated in the chart below, with the green months being those 99 months accounting for the positive historical return.

What does this mean for investors? No one can time the market and determine when those best months will occur. The best months are surprisingly random. More important than timing the market is time in the market. In order to have a better chance of participating in the market’s upside, you should be present the whole time, because you must be present to win!

Questions about markets? Reach out, we’d love to have a conversation with you.

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Chart Source: DFA Returns Web

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