From the Great Depression to today: its all been about time, not timing

The ability to consistently time the market is arguably the most desirable, yet most elusive, skill in investing. Yet, it continues to evade even the most highly paid professionals.

In fact, last year we showed that the market forecasts of Wall Street’s best are negatively correlated with subsequent returns. See here:

Equities

Don’t listen to Wall Street if you want to know what markets will do in 2025

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So yes, market timing is difficult, but it can also wreak irreparable damage on long-term wealth.

A famous study, popularised by J.P. Morgan Asset Management in the early 2000s, examined the impact on terminal wealth of missing just a handful of the market’s best days. In this wire, we update that analysis using data going back to the Great Depression (the original study focused on the S&P 500 from 1980 onwards), and extend it to include Australia.

If your grandfather had invested just $100 at the start of 1928 and simply left it untouched, it would be worth a healthy $127,688 today (with dividends reinvested), as shown in red below. Wouldn’t that have been nice pop. Would have paid for a couple of years of school fees!

However, if he had capitulated after the ~90% drawdown from 1929 to 1932 and missed the single strongest day in stock market history, 15 May 1933, when the S&P 500 surged 16.6% in one day, his terminal wealth would fall to $109,483.

Miss just the five best days, and terminal wealth drops further to $69,234.

Miss the best 30 days, and the outcome is catastrophic: just $8,653.

Of course, the reverse is also true: avoid the worst days and your wealth would multiply.

The problem is that doing so would require either clairvoyance, or an information advantage that tends to come with legal consequences. For most investors, that’s not a sensible strategy.

What about Australia?

The same pattern holds locally.

From 1992 to 2026, $100 invested in the S&P/ASX 200 would have grown to $1,510.

• Miss the best 5 days --> $1,191
• Miss the best 30 days --> $398 

The uncomfortable truth

The impact of missing just a small handful of days is profound. And critically, those days tend to occur:

• During periods of maximum uncertainty
• In the depths of market stress
• When investors feel least comfortable being invested

The single best year in equity market history, 1933, occurred in the depths of the Great Depression.

Why we don’t time the market

Market timing requires being right twice:

1. When to get out
2. When to get back in

Get either wrong, and the cost is enormous. The days you are most tempted to sell are precisely the days you can least afford to miss

As the old adage goes, time in the market beats timing the market.

At Plato Global Alpha, we maintain close to market-neutral exposure and remain fully invested at all times. 

This discipline has served the strategy particularly well in recent years, where markets have repeatedly sold off, only to recover and reach new highs within weeks.

Learn about investing in the Plato Global Alpha Fund - Complex ETF (ASX: PGA1)

You can invest in the Plato Global Alpha Fund via the ticker PGA1. The Complex ETF is available on any brokerage platform. The Fund has delivered +22.63% p.a. since inception after fees (inception 1 September 2021). 

Past performance not reliably indicative of future return. Read all fund information, including the PDS and TMD available here: (VIEW LINK)

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