The cost of fear: 24-year history shows how exiting the market at the wrong time can hurt returns

Timing the stock market is incredibly difficult—not just in predicting the best days but also in identifying the worst ones. "The best days of returns come after the days when markets stumble the most!" says Abhishek Tiwari, Chief Business Officer at PGIM India Mutual Fund.

According to Tiwari, missing just a handful of the best-performing days can significantly impact an investor's long-term returns. "This raises an important question: Does missing just a few of these big days matter in the long run? The answer is a resounding ‘YES!’" he emphasizes.

The Impact of Missing the Best Days

Historical data spanning 24 years (Nifty 50 TRI, 2001-2025) reveals that some of the market’s best days occurred during or immediately after a major correction.

"Since 2001, some of the market’s best days (regarding daily returns) occurred either during a correction phase or shortly after that," Tiwari notes. "It’s intuitive to think that markets bounce back stronger after a downturn. But what surprised me was that almost 30 of the 50 best days in the last 24 years were after a market correction."

Many of these strong recovery days were seen during major crises like the Global Financial Crisis (2008-09) and the COVID-19 crash (2020). "This isn’t just a local trend; it holds across global markets," he adds.

The Numbers Tell the Story

PGIM India’s analysis highlights the severe impact of missing just a few of the market’s best-performing days:

Fully invested (2001-2025): 30.8x growth | CAGR: 15.61%

Missed the 5 best days: 19.5x growth | CAGR: 13.27%

Missed the 10 best days: 14.3x growth | CAGR: 11.68%

Missed the 20 best days: 8.3x growth | CAGR: 8.86%

Missed the 30 best days: 5.1x growth | CAGR: 6.26%

Missed the 40 best days: 3.4x growth | CAGR: 4.00%

Missed the 50 best days: 2.1x growth | CAGR: 0.60%

"More often than not, it is our behavior—our ability to stay invested through volatility—that determines long-term returns, rather than attempting to time the market or chase the next multi-bagger stock," Tiwari explains.

Market Volatility and Investor Behavior

Tiwari emphasizes that market corrections are temporary, but wealth creation requires patience and discipline. "A significant chunk of these best days occurred during major crises, not just in India but globally," he says. "This reinforces the idea that fear-driven exits can result in missed opportunities."

What Should Investors Do?

The biggest rallies often occur when fear is at its peak, which means missing just a few of these best days can significantly impact long-term returns.

"So, the next time markets stumble, remember: history shows that patience and discipline are often rewarded," Tiwari concludes.

For investors, the message is clear -- staying invested through volatility is the best way to build long-term wealth.

(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times.)