Charts are a staple of finance and investing. You can tell a lot of different stories with a chart. One of the longtime favourite charts of (some) financial advisers has been the “if you missed the best days chart”.
This type of chart would show the growth of $1000 over a timeframe on a specific stock market. Over 15, 20 or 25 years. Maybe if someone was invested over the whole 20 years their money could grow to $6,000, miss the best day and their money only grows to $5,850. Miss the best five days and their money only grows to $5,500 etc.
Essentially you keep knocking off the best few days of market returns, and your potential return would get smaller and smaller. The story being told is the value of staying put. You never know when the good days are coming, so there’s no point jumping in and out of the market trying to time when the good and bad will arrive. And if you jump out, you may miss a recovery.
Some of the more cynical beasts in the advice community would sometime rail about the chart. Suggesting that it also ignores some other stories. What about if you missed the worst days, how much better would the chart look like then! There was another argument that some of these best days are around the worst days, so they’re really just offsetting the best days! Finally, all these days are just random, so the odds of missing them is very unlikely.
Read the full “The Best Five Days in Small” post.
This represents general information only. Before making any financial or investment decisions, I suggest you consult a financial adviser to take into account your personal investment objectives, financial situation and individual needs. Anyone looking to build a portfolio should seek financial advice to find out which strategy is right for them, if you are looking for a fiduciary in Australia, then you should consider one of Australia’s fiduciary financial advisers who are certified by CEFEX to ensure your needs are put first.
