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Ask the Institute - Trying to time Market Volatility

Wells Fargo Investment Institute - July 2020

Transcript: Ask the Institute: Trying to time Market Volatility

We’ve all heard the phrase, timing is everything.

So, how do you time investing in a volatile market?

Over time we have seen fluctuations in the stock market.

Now, what if you could remain invested in the markets during the very best days but avoid the worst days. That would lead to far higher returns over time.

But is that even possible?

History suggests that the best days and the worst days of the stock market often happen in a tight timeframe. Sometimes on consecutive days.

So how do you know when is the best time to buy or sell?

Consider this.

When the market declines rapidly, many investors sell off assets.

However, often, those same investors will mistime the rebound – and, with it, the profit.

This chart shows the hypothetical outcomes over the last 30-year span.

You can see, that missing the best 10 days, it takes the average annual return of the S&P 500 from 6.7% … down to around 4%.

And missing the best 30 days resulted in an annual return of less than 1%. Not good.

We believe it’s wiser to remain invested in the equity markets even in the most volatile of times.

Because if you stay fully invested in equity markets, over the long run, history suggests you may see more upside than trying to dodge the worst-performing days.

If you would like more help, you’ll find informed opinions, guidance, and resources on our website.

Or if you have a question, something you don’t understand, please reach out and talk to a Wells Fargo financial professional.