How missing a few days in the market can drastically reduce your returns

By Vanguard

Investing strategy

There is an old saying that good investing is about “time in the market, not timing the market.”

While it may be tempting to react to the constant stream of market news, a low-cost “buy and hold” strategy using index-tracking ETFs or managed funds often delivers better long-term results.

During volatile periods, such as we saw in April, some investors may feel compelled to sell when headlines turn bleak. But history shows that the best trading days often follow the worst, and missing just a few of them can significantly reduce returns.

 

The cost of missing the best days in the market

Vanguard’s Investment Strategy Group analysed the impact of missing the top 30 trading days in the Australian share market between April 2000 and May 2025.

Over that 25-year period, the S&P/ASX 300 Index returned 8.2% per year, including reinvested dividends.¹

But what happens to returns if you miss just a few of the best trading days?

• Missing the best 30 days reduced the return of the index to 2.8% — a reduction of nearly two thirds.
• Missing the best 20 days reduced the return of the index to 4.3% — a reduction of nearly one half.
• Missing the best 10 days reduced the return of the index to 6% — a reduction of about one quarter.

These numbers highlight just how costly it can be to sit on the sidelines, even briefly.

Missing a few days of market rallies drastically reduces returns for Australian equities

Annualised total returns of Australian stock market from 2000 through 2025.

The best 30 days account for almost two thirds of the long-term return of the Australian stock market, and they’re often clustered near the worst days.

^{Sources: Vanguard calculations, using data from Bloomberg, as of 19 May 2025.}

^{Notes: Returns are based on the daily total return (with dividends reinvested) of the S&P/ASX 300 Index from April 2000 to 19 May 2025.} 

^{Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.} 

 

What makes market timing especially difficult is that the best trading days are often clustered near the worst days.

As we have seen in recent months, markets can recover quickly. From the low on April 7 to the end of May, the S&P/ASX 300 (including reinvested dividends) gained 15.4% in just a few weeks.

Importantly, the vast majority of the 20 best trading days on the Australian share market since 2000 occurred during major downturns such as the Global Financial Crisis and the COVID-19 pandemic, periods when investors were more likely to consider shifting away from riskier asset classes.

 

Focus on what you can control

At Vanguard, we believe that successful investing is built on four simple principles:

1. Setting appropriate goals — good goals are measurable, attainable and focused on the long term.
2. Stay well balanced — diversification is useful because the best-performing asset one year can be the worst the next.
3. Minimising costs — because in investing, every dollar you pay in costs is a dollar out of your future returns.
4. Maintaining a long-term perspective — impulsive short-term decisions can make it harder to reach your long-term goals.

The best part? These are all things investors can control, unlike the daily ups and downs of the market.

Staying the course may not always feel easy, but history shows it is often the most rewarding path.

 

^{1 Returns are based on the daily total return (with dividends reinvested) of the S&P/ASX 300 Index from April 2000 to 19 May 2025. Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.}