Here’s the Cost of Moving to the Sidelines

Markets rarely tempt investors to make bad decisions when things feel calm.

They tempt investors when the headlines are loud, losses are fresh, and moving to cash feels less like panic and more like prudence.

That is what made the first quarter so difficult.

From its late-January high through the end of March, the S&P 500 fell nearly 10% as the U.S.-Iran conflict pushed oil prices more than 60% higher. Headlines about the Strait of Hormuz, rising energy costs, and the potential economic fallout created the kind of environment where investors naturally begin asking a very human question:

Should I get out before this gets worse?

Market Timing Rarely Feels Like Market Timing

That question is understandable. It is also dangerous.

The problem with market timing is that it rarely feels like market timing in the moment. It feels like caution. It feels like discipline. It feels like protecting what you have built.

But getting out is only half the decision.

You also have to know when to get back in.

And that second decision is often the harder one.

When ceasefire talks emerged in late March, markets quickly began to recover. Investors who moved to the sidelines during the selloff were then faced with a new question:

Do I get back in now, after the market has already bounced, or do I wait until things feel calmer?

That is where many investors get hurt.

By the time the environment feels safe again, the market has often already moved. The recovery does not usually announce itself ahead of time. It often begins while the headlines are still uncomfortable, while the outcome is still uncertain, and while investors are still waiting for confirmation.

The Best and Worst Days Arrive Together

That is why the best and worst days in the market tend to arrive close together.

Figure 1 illustrates this pattern. The chart shows the S&P 500’s daily returns over the past 26 years and highlights an important truth: the market’s largest moves tend to cluster. The biggest selloffs do not happen in isolation. They are often surrounded by some of the strongest rallies.

We saw this during the 2008 financial crisis. We saw it during the 2020 pandemic. We saw it during the tariff-driven volatility of 2025. And we saw it again during the recent U.S.-Iran volatility, when the S&P 500 posted its strongest daily return since April 2025 on optimism around a possible ceasefire, only days after escalating tensions had pushed stocks lower.

That is the uncomfortable reality of investing through uncertainty.

The same environments that produce sharp selloffs often create the conditions for sharp recoveries.

Missing a Few Days Can Cost You Decades

Figure 2 puts a dollar amount on that lesson. A $10,000 investment in the S&P 500 on December 31, 1999, would have grown to $75,242, despite a period that included the dot-com bust, the global financial crisis, the pandemic, inflation shocks, rising rates, wars, and political uncertainty.

That result did not come from avoiding every downturn.

It came from staying invested through them.

Missing just the 10 best trading days would have reduced the ending value to $33,473, less than half the fully invested result. Missing the 20 best days would have lowered it to $19,443. Missing the 30 best days would have brought it down to $12,358. And missing the 50 best days would have turned the original $10,000 into just $5,607.

In other words, an investor could have lived through a period when the market created substantial wealth, yet still lost money by missing too many of the right days.

That is what makes market timing so costly.

You do not have to be wrong all the time. You only have to be wrong at a few critical moments.

Bottom Line

This year’s volatility may feel unsettling, but it reinforces one of the most important principles of long-term investing: the plan has to be built before the panic arrives.

A well-constructed financial plan does not assume markets will always cooperate. It assumes there will be downturns. It assumes there will be recessions. It assumes there will be geopolitical shocks, energy price spikes, scary headlines, and stretches of time when discipline feels uncomfortable.

That is why cash reserves matter.

That is why diversification matters.

That is why rebalancing matters.

And that is why your investment strategy should be connected to your broader financial plan, not just to your feelings about the latest headline.

Selling during a decline may provide temporary emotional relief, but it also locks in losses and creates a difficult re-entry problem. Staying invested does not mean ignoring risk. It means managing risk through a plan rather than reacting to fear.

What the Market Actually Rewards

The market does not reward perfect timing.

It rewards patience, discipline, and the ability to stay anchored when the headlines are loud.

And as the first quarter reminded us, missing just a few of the market’s best days can come at a very high cost.