Why the Best Stock Market Days Follow the Worst – And What It Means for Investors

The Best Stock Market Days Happen Near the Worst

Investing in the stock market can feel like riding a roller coaster. Huge drops make investors panic, and big rallies give them hope. But here's the kicker: the biggest stock market gains tend to come right after the worst declines.

Data from Carson Investment Research shows that since 1990, the S&P 500 has gained an average of 9.8% per year. However, if you miss the 10 best days in the market, your returns drop to -12.5% (Source). The problem? Those best days usually happen within days or weeks of the worst days. You could miss the following comeback if you panic-sell during a market crash.

Why Do the Best and Worst Market Days Cluster?

Stock markets are highly emotional. Institutional investors and other major players often step in when prices drop sharply, triggering a rebound. Additionally, when short sellers cover their positions, it causes rapid price spikes. These factors create an environment where the best days follow the worst.

One study by JP Morgan found that 7 of the 10 best days in the stock market occurred within just two weeks of the 10 worst days (Source). This shows that market rebounds happen fast and are hard to predict.

How Fear Causes Investors to Miss Market Rallies

Selling when the market crashes might feel like a smart move, but it can cost you in the long run. Here's why:

• Most market recoveries are sudden. You can't benefit from them if you're out of the market.

• Timing the market is nearly impossible. Even professionals struggle to buy and sell at the right time.

• Fear makes people overreact. Emotional decision-making often leads to selling low and buying high—the opposite of what one should do.

One example: In March 2020, the S&P 500 dropped -34% in just a month due to fears of COVID-19. Investors panicked. But by August 2020, the market had fully recovered and hit new highs. Those who sold in March likely missed the rebound.

What Can Investors Do?

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

1. Stay Invested

The data is clear—staying in the market gives you the best chance at long-term growth. The stock market is unpredictable in the short term but has historically trended upward.

2. Use Dollar-Cost Averaging (DCA)

Instead of trying to time the market, invest a fixed amount regularly. This dollar-cost averaging strategy reduces risk and removes emotions from the equation.

3. Diversify Your Portfolio

Spreading investments across different asset classes can help manage risk. A well-diversified portfolio is less affected by market swings and can improve long-term returns.

Frequently Asked Questions (FAQ)

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 tough. Most of the market's most significant gains happen within days of the worst declines, and predicting the perfect time to buy back is nearly impossible.

Q: What if another major crash happens?

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

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

A: It depends on your mindset. If frequent updates make you anxious and lead to impulsive decisions, it's best to focus on your long-term plan instead of daily fluctuations.

Final Thoughts: The Best Market Days Come When You Least Expect Them

Market volatility is 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 severely impact your long-term returns.

Instead of reacting emotionally, focus on long-term strategies like staying invested, dollar-cost averaging, and diversifying your portfolio. The market rewards patience—don't let fear cost you your financial future.