Just How Quickly Can You Go from a Winner to a Loser?

Hopefully, you’re already well aware of the risks of trading on the stock market. The last couple of months have provided all the evidence you need to see how quickly gains can evaporate.

The consequences are not simply contained to amatuer, retail traders either. The markets can be a ruthless place for investors of all levels.

As we’ve also reminded readers — and as Yahoo Finance further points out as well today —  most pros can’t even beat the market. According to S&P Dow Jones data, more than half of active large-cap equity fund managers have underperformed the S&P 500 (^GSPC), each of the last 11 years. The fact is, fund managers in the top 50th percentile of their specific categories in a given year rarely rank that high in the years following.

On Tuesday, Compound Capital Advisors’ Charlie Bilello shared some relevant stats on Twitter that revealed just how much we’re truly at the mercy of the markets:

“The 25 stocks in the S&P 500 with the lowest returns last year are all positive to start the year, with a median return of +32%. On the flip side, the best-performing stocks from last year are underperforming with a median return of -3% to start the year.”

Just look at what’s happening right now…

With the S&P 500’s 6% year-to-date gain trailing many reopening trades, depending on if, when and how you rebalanced your stock portfolio, you may have gone from outperforming to underperforming, in a matter of days or weeks. This means sectors like energy and financials which had down years in 2020, are handily outpacing the previously strong tech, consumer staple and discretionary sectors of the S&P500, through 2021 so far.

Bank of America Strategist, Savita Subramanian sums it up best, “Market timing is difficult.”

In fact, her advice for investors who can’t quite stomach such losses:

“Time is money. For stocks, the best recipe for loss avoidance is time. The probability of losing money over one day is a little worse than a coin-flip (46%), but the probability declines to just 6% over a 10-year window since 1929.”

Market-timing comes with the risk of missing out on strong days, but history says the best way to improve the odds of a positive return is to lengthen your time horizon.

Originally published by Yahoo Finance

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