Markets Don’t Pause for You

In today’s unpredictable market environment, sharp swings have become routine rather than rare. Such volatility can trigger panic, leading investors to exit prematurely in an attempt to avoid losses. However, history shows that missing just a handful of the market’s best-performing days can significantly reduce long-term returns. This article delves into why riding out the turbulence and staying invested often proves to be the most rewarding approach 

We live in an age of perpetual uncertainty. Geopolitical flashpoints like Operation Sindoor, the Russia-Ukraine conflict, and U.S.-China tariff wars trigger intraday market swings exceeding a couple of percentage points very easily. For example, Nifty 50 opened as much as five per cent below its previous closing on April 7 at 21,743.65 as U.S. President Donald Trump announced a 10 per cent baseline tariff on all countries and imposed sweeping tariffs on multiple trade partners, with rates as high as 49 per cent. Such a huge fall gives the temptation to investors to exit during turbulence and feels rational—even prudent. Yet historical data reveals a brutal truth: Missing just a handful of the market’s strongest days can vaporize decades of wealth. Just a few days of big upmove account for a disproportionate share of long-term returns. Miss those best-performing days, and your portfolio’s gains could shrink dramatically. This is as true on Dalal Street (India’s Nifty 50 index) as it is on Wall Street (U.S. S&P 500). In this article, we’ll dive into historical data to see how staying invested beats trying to time the market – with hard numbers, charts, and tables to prove it. 

Why Timing the Market Is Tempting – But Dangerous
Market volatility can rattle even seasoned investors. It’s human nature to think we can dodge the pain of downturns by stepping out of the market when things go south. However, the stock market’s gains are not evenly distributed over time – they tend to be concentrated in just a few sharply positive days that often arrive unpredictably, usually amid bad news and despair. If you’re sitting on the sidelines during those rare big rebound days, the impact on your long-term returns can be devastating. In fact, 78 per cent of the market’s best days occur during bear markets or in the first two months of a recovery – precisely when many investors are too fearful to be in the market. This means the very act of trying to avoid losses can cause you to miss the gains. 

The best example is the current rally that we are witnessing. Since its recent low, the frontline index BSE Sensex is up by almost 15 per cent. It clearly shows when the mood was uncertain, the markets turned. The swift rebound caught most by surprise. Those who stayed invested or took the contrarian call to buy during the dip gained. Others, who waited for more clarity, watched the rally from the sidelines. It was yet another reminder that markets move before consensus forms. And by the time certainty arrives, the opportunity often doesn’t. 

The Numbers Do Not Lie
Consider this: an investor who stayed invested in the BSE Sensex from April 1979 to May 2025 would have seen their ₹10 lakh investment swell to a breathtaking ₹65.59 crore. However, if they had missed just the five best-performing days over those 45 years, the final corpus would have shrunk by nearly half to ₹36.18 crore. Miss 10 such days, and they’d have lost two-thirds of the total potential return to ₹23.04 crore. 

This isn’t just a statistical quirk—it’s a fundamental feature of how markets behave. Market rallies aren’t neatly spaced out for convenient participation. They arrive unannounced, often following periods of intense pessimism, and disappear just as quickly. The best days are rarely predictable, but they are absolutely essential for your investment returns. 

The analysis clearly shows that missing just a few of the best trading days in the Sensex significantly erodes long-term returns. If an investor had remained fully invested, his investment would have compounded at an impressive CAGR of 15.07 per cent. However, missing the top 5 days alone reduces the CAGR to 13.60 per cent, and missing 30 of the best days pulls it down further to just 9.19 per cent, more than halving the wealth creation potential. To put this in context, long-term fixed income instruments such as PPF or government bonds typically yield around 7-8 per cent CAGR, while India’s average inflation rate has hovered around 6-8 per cent historically. Therefore, even a slightly compromised market participation—by missing key days—can cause equity returns to drift dangerously close to fixed income levels, barely beating inflation after tax, undermining the very reason for taking equity risk. That’s the difference between creating wealth and merely preserving capital. 

The numbers don’t lie – a handful of days make the difference between substantial wealth and mediocre returns. For Sensex, missing the best 50 days, just ~0.5 per cent of all trading days over 45 years would have reduced the ending portfolio value by about 97 per cent and cut the annual return nearly in half. 

Why Are the Best Days So Critical?
You might wonder: How can just 10 or 20 days have such an outsized impact on 45 years of returns? It comes down to the power of compounding and the distribution of stock market returns. 

Daily market returns follow a roughly bell-shaped distribution – most days, the index moves only a little (up or down less than 1 per cent). Truly large up-days (say +2 per cent in a day) are rare. They reside on the far-right tail of the return distribution histogram. Over a 45-year span, there are roughly 10,728 trading days. Out of those, roughly on 750 days Sensex saw gains above +2 per cent, which comes to around six per cent. Such days occur infrequently – perhaps only 15-16 days in a typical year on average. In calm years, there may be virtually none; in turbulent years, you might get a cluster of big upswings. 

The bulk of the bars (frequency of days) is centred around small daily changes (around 0 per cent). The far right tail – representing days with higher gains – is extremely thin. Yet those slender few bars, sparse as they are, contribute massively to your portfolio’s growth. If you exclude them, the mean return drops significantly. In fact, without those positive outliers, the long-term average might not overcome the modest down days and flat days – hence your CAGR collapses. 

Let’s also look at how these big-gain days are distributed by year. The graph below shows the number of 2 per cent+ up-days per year for the Sensex since 2015 or in the last ten years. We can see a clear pattern, there were very few days with >2 per cent jumps – markets rose gradually in small increments. But in high-volatility years – especially those surrounding market crises – the count of big up-days spiked. For instance, during 2020, the year of the COVID crash and rebound and the subsequent recovery, there were many 2-5 per cent rally days as markets seesawed. It witnessed a cluster of outsized daily gains (as well as outsized losses) in March and April. These were exactly the moments when an emotional investor was likely on the sidelines – thereby missing the rebound. 

The takeaway from the above graphs is clear: The best days are few and far between, but they often arrive clustered around the worst days (market stress events). This makes them exceptionally easy to miss. If you were out of stocks during those turbulent times – which is exactly when many people flee – you invariably missed the upside surprises that followed. 

The Volatility Clustering Phenomenon
A remarkable and often underappreciated pattern in markets is the phenomenon of volatility clustering—where the most dramatic upswings tend to occur during or immediately following periods of panic. Best days don’t occur randomly. They cluster violently during bear markets. This is not a coincidence; it’s the market’s way of recalibrating after intense stress. 

Take the S&P 500, for example. Seven of its ten best-performing days between 2000 and 2025 occurred within weeks of the market lows during the 2008 global financial crisis. Similarly, in 2020, the three strongest days came just days after the COVID-19-induced crash sent global indices into freefall. These gains did not wait for clarity—they erupted through the fog of uncertainty. 

The same applies to Indian markets. March 25, 2020, saw the Nifty leap 4.78 per cent after the RBI’s stimulus package. On April 7, 2020, it surged another 3.62 per cent as optimism grew over coordinated global monetary action. These rallies came not when investors felt safe, but when fear was at its peak. Those who exited the market during the fall missed these lightning-quick rebounds. Similarly, in 2009, frontline indices hit the upper circuit even as the market continued to grapple with the aftermath of the global financial crisis. 

The Behavioural Trap—Why Humans Can’t Time Markets 

The Psychology of Missed Opportunities
At the heart of poor market timing lies emotion—specifically, how humans process gains and losses. Neuroscience research confirms that missing gains triggers emotional pain two times greater than the joy of making equivalent returns. This powerful asymmetry fuels irrational decisions. 

Investors routinely sell winners too early, convinced they’ll rebuy at a lower price. Then, when markets fall and they exit, they hesitate to return—even as prices recover—because they fear the fall isn’t over. The hesitation often turns into a missed rally. 

The cost of these emotional cycles isn’t just theoretical. DALBAR, which measures the effects of investor decisions to buy, sell and switch into and out of investment over short and long-term timeframes, through its Quantitative Analysis of Investor Behavior (QAIB) revealed that the average equity investor earned just 16.54 per cent in 2024, compared to the S&P 500's 25.05 per cent return. DALBAR’s 2024 study also showed that over the past 30 years, the average equity investor underperformed the S&P 500 by 3.8 per cent annually—largely due to mistimed entries and exits. The primary culprit? Missing recovery days that occurred while investors waited for reassurance. 

The Impossibility of Precision
Despite the lure of market timing, academic research reveals just how mathematically improbable it is to outperform buy-and-hold investing. Nobel laureate William Sharpe demonstrated that in order to beat a simple long-term strategy, a market timer would need to be right 74 per cent of the time—far above what even most professionals have achieved consistently. 

Even the most trusted market timing signals don’t help when investors need them most. Take the Zweig Breadth Thrust—an indicator with a near-perfect record since 1957. While it has reliably marked opportunities, it does so only after a surge has already begun. It doesn’t—and can’t—predict the absolute bottom. 

These findings reinforce a harsh truth: successful timing requires both a perfect exit and a flawless re-entry. In reality, the more often investors try to be precise, the more likely they are to miss key moments. 

The unpredictable nature of these best days makes it virtually impossible to capture them through market timing. Many of the top-performing sessions occur amidst a backdrop of negative news—global financial shocks, elections, policy turmoil. Rarely do they arrive with advance notice or follow an obvious trajectory. Waiting for the dust to settle often means watching the rebound from the sidelines. 

So, what can investors do? The answer is deceptively simple: stay the course. Ultimately, the greatest cost in investing is not market crashes—it’s missed opportunities. And the most lucrative opportunities are often shrouded in fear, disguised as days of volatility. Missing those windows, even inadvertently, can permanently impair wealth creation. 

In the rush to avoid short-term pain, many investors sidestep long-term gain. They think they’re playing it safe. In reality, they’re just standing in their own way. 

As Warren Buffett once said, 'The stock market is a device for transferring money from the impatient to the patient.' And as the data shows us again and again, the patient investor doesn’t just survive the market’s storms—they emerge stronger on the other side. 

The real secret to building wealth in equities isn't timing the market. It's time in the market. 

Long-Term Costs in Perspective
Here are a few practical tips for investors to harness the power of staying invested: 

• Keep a Long-Term Perspective: Remember that markets trend upward over extended periods despite short-term setbacks. If your goal is years or decades away (retirement, kids’ education, etc.), temporary drops are just noise. Focus on the 10- or 20-year horizon, not the daily ticker.
• Avoid Knee-Jerk Reactions: It’s easier said than done, but try not to let fear or headlines prompt rash decisions. Often the best days follow the worst days – selling after a big drop locks in a loss and risks missing the rebound. Stick to your asset allocation unless something fundamentally changes in your life or goals.
• Diversify and Rebalance: Diversification can cushion blows, and periodic rebalancing forces you to 'buy low, sell high' in a rule-based way. For example, if equities tank and your allocation drifts, rebalancing will add to stocks at lower prices, setting you up for the rebound – again, keeping you in the game for those best days.
• Tune Out the Noise: Daily market news can be addictive and anxiety-inducing. Remember that volatility is normal – the Nifty 50 sees an average intra-year decline of about 10-15 per cent nearly every year, yet most years finish positive. Don’t let every twist and turn derail you. As long as your investment thesis and needs haven’t changed, stay the course. 

Conclusion: Time IN the Market Beats Timing the Market 

The verdict from our analysis is unequivocal: missing the market’s best days is one of the costliest mistakes an investor can make. A strategy of trying to sidestep short-term losses often backfires by forfeiting the strong gains that follow. Patience and discipline pay off. By staying invested through thick and thin, you ensure you’ll be there when those few and far between big up days occur – and your portfolio will be far better off for it. 

For retail investors building wealth, the path to success is not in darting between stocks and cash in an attempt to be clever. It’s in riding out the storms and allowing the market’s long-term growth to work for you. As the data showed, even being wrong and enduring downturns leaves you better off than missing the recoveries. The power of compounding, turbocharged by those critical best days, does the heavy lifting for your returns – but only if you stay in the market. 

So next time volatility strikes and you feel the urge to hit the eject button, remember the lessons of Nifty: the price of missing out is just too high. Instead of trying to time the jumps, focus on time in the market. Stay invested, keep your cool, and give your money the opportunity to grow. Your future self will thank you when you see the difference a few days (that you didn’t miss) can make. In investing, patience isn’t just a virtue – it’s profit.