When markets fall sharply, moving to cash feels like the best option. But the evidence tells a different story.
Analysis of global equity markets from 1995 to 2025 shows that a £10,000 investment left fully invested would have grown to approximately £120,000 – an annualised return of 8.7%. Miss just the 30 best trading days over that period, and the same investment is worth around £33,000. That’s the cost of trying to time the market.
What makes this particularly challenging is that the best and worst days in equity markets tend to cluster together. During the 2008 financial crisis, the market’s largest single-day gain occurred just six trading days after severe losses. Investors who had sold out missed it entirely.
The COVID-19 period is another example. Analysis shows that an investor who stayed invested from the March 2020 sell-off ended up with approximately 60% more in their portfolio by late 2025 compared to someone who moved to cash at the point of stress.
Moving to cash during volatile periods can crystallise losses, cause investors to miss rapid recoveries, and create difficult re-entry decisions. These are outcomes that are hard to recover from.
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