Missing the Worst Days Beats Catching the Best

You've heard it before: 'Don't try to time the market—you'll miss the best days!' But here's the twist: avoiding the worst days matters even more. Risk-aware timing can significantly outperform passive investing.

The “Best Days” Fallacy

Financial firms love to show what happens if you miss the 10 best days in the market. But they rarely mention that those best days often occur in the middle of bear markets. Why? Because market rebounds typically follow sharp crashes.

Avoiding Disaster Is More Powerful

Let’s flip the logic. What happens if you miss the worst days instead?
• From 1990 to 2020, staying fully invested in the S&P 500 returned ~9.3% annually.
• Missing the 10 worst days? Returns jump to ~14.7%.
• Missing the 20 worst days? Over 17%.

That’s more impact than missing the best days—because losses are harder to recover from.

Volatility Comes in Clusters

The best and worst days aren’t scattered—they cluster. Which means if you time your exit ahead of major risk events (like the 2008 collapse), you likely miss both the worst and best days—but your risk-adjusted return improves dramatically.

Using Risk Filters

Rather than guessing, some investors use volatility filters or trend indicators to reduce exposure during turbulent times. For example:
• Exiting when the VIX rises above 30.
• Avoiding stocks during negative 200-day moving average trends.
• Allocating more to cash when bond-stock correlation spikes.

Time Out Can Mean Time Saved

Market timing doesn’t need to be about picking the exact bottom. It can be about pausing during chaos and re-entering with discipline. Reducing risk in the worst weeks often leads to better compounded returns over the long haul.