Don't Miss Out! The Best Stock Market Days Follow the Worst Ones

Are you feeling nervous about the ups and downs of the stock market? You're not alone. The good news is that some of the biggest stock market gains happen right after the biggest drops.

What is the S&P 500?

Before we dive in, let's explain what the S&P 500 is. It's a list of 500 of the largest companies in the United States. Many investors use it to see how well the overall stock market is doing. Think of it as a temperature check for big American businesses.

While we have similar indexes in the UK, like the FTSE 100, the S&P 500 is widely watched around the world because American companies have such a big impact on global markets. Many UK investors put some of their money into American shares through funds that track the S&P 500.

The Rollercoaster of Investing

Investing in shares can feel like a theme park ride. Big drops make people panic and sell, while big jumps make them feel hopeful. But here's the important bit: the biggest stock market gains usually come right after the worst falls.

Research from Carson Investment shows that since 1990, the S&P 500 has grown by about 9.8% each year on average. But if you miss just the 10 best days in the market, your returns would drop to -12.5%. That's a huge difference!

The tricky part? Those best days usually happen very close to the worst days. If you panic and sell during a crash, you could miss the big bounce back that follows.

Why Do the Best and Worst Days Happen So Close Together?

The stock market is driven by emotions. When prices drop sharply, big investors often step in to buy shares at cheaper prices, which causes a bounce back. Also, when people who bet on prices falling (called "short sellers") close their bets, it can cause prices to jump quickly.

JP Morgan found that 7 of the 10 best days in the stock market happened within just two weeks of the 10 worst days. This shows that market recoveries happen fast and are hard to predict.

How Fear Makes Investors Miss Out

Selling when the market crashes might feel like the safe thing to do, but it can cost you in the long run.

Here's why:

• Most market recoveries happen suddenly. You can't benefit if you're not invested.

• Trying to time the market is nearly impossible. Even professionals struggle with this.

• Fear makes people overreact. Emotional decisions often lead to selling low and buying high—the opposite of what you should do.

For example: in March 2020, the S&P 500 dropped 34% in just one month because of COVID-19 fears. Many investors panicked and sold. But by August 2020, the market had fully recovered and reached new highs. Those who sold in March likely missed this amazing comeback.

The same pattern happened in UK markets too. The FTSE 100 crashed but then recovered strongly, rewarding those who stayed invested.

What Should UK Investors Do?

Here are three key strategies to avoid missing the best market days.

1. Stay Invested

The evidence is clear - staying in the market gives you the best chance at growing your money over time. The stock market goes up and down in the short term but has historically grown over longer periods.

For UK investors, this might mean keeping money in your ISA or SIPP, even when markets look scary. Remember that tax-free wrappers like ISAs are valuable tools for long-term wealth building.

2. Use Regular Investing

Instead of trying to time the market, invest a fixed amount regularly. This strategy (called "pound-cost averaging" in the UK) reduces risk and takes emotions out of the equation.

Some UK investment platforms let you set up monthly direct debits from as little as £25, making this approach easy for anyone to follow.

3. Spread Your Investments

Putting your money across different types of investments can help manage risk. A well-spread portfolio is less affected by market swings and can improve your long-term returns.

For UK investors, this might mean owning some UK shares, some international shares, some bonds and perhaps some property funds. Many people achieve this easily through low-cost index funds or multi-asset funds.

Common Questions

Q: If I sell during a crash, can't I just buy back when the market starts recovering?

A: in theory, yes. But in reality, it's very difficult. Most of the market's biggest gains happen within days of the worst drops, and predicting the perfect time to buy back is nearly impossible.

Q: What if another big crash happens?

A: market downturns are normal. History shows that the stock market recovers with time and reaches new highs. Staying invested through the ups and downs has been the best strategy over time.

Q: Should I stop checking my investments during a downturn?

A: it depends on your mindset. If checking often makes you anxious and leads to hasty decisions, it's best to focus on your long-term plan instead of daily changes.

Remember: The Best Market Days Come When You Least Expect Them

Market ups and downs can be scary, but history shows that staying invested is the best way to build wealth. The worst market days are often followed by the best; missing just a few can seriously impact your long-term returns.

Instead of reacting emotionally, focus on long-term strategies like staying invested, regular investing and spreading your investments across different areas. The market rewards patience - don't let fear cost you your financial future.