The Federal Reserve met this week and as expected, cut rates by 0.25%. This marks the second cut of 2025, the possibility of another cut in December is now in question. It may be early 2026 before we see anything more. The Fed will continue to watch the data closely - and so will we.
Why Staying Invested Matters:
In previous blogs, we discussed the benefits of staying invested through market volatility. Choosing an asset allocation that aligns with your risk tolerance is key to successfully investing. If your portfolio is too aggressive, you may jump out of the market at the worst possible moment, and you can affect your long-term performance. While it’s easy to think that missing a few days in the market won’t make a difference, history proves otherwise.
Markets can rise and fall dramatically in short bursts—what some call “magic days.” Missing just a few of those big up days (or down days) can have a profound impact. The Stock Market Is Good, Bad and Ugly, Often in Quick Succession - The New York Times
The chart below shows the S&P 500 over the last 25 years. With an initial investment of $100k on June 30, 2000, the chart shows 6 scenarios starting with the S&P 500 performance, it then shows what happens to performance if you miss the 10, 20, 30, 40 and 50 best days in the market. 25 years is a long time – even taking out weekends and holidays – there are about 6,300 market days in 25 years. On a percentage basis, 50 days out of 6,300 is less than 0.8%. Being out of the market for those 0.8% of days changed the account balance from $757.65k to $57.20k. That is more than a 90% difference!
The Effect of Missing the Best Market Days Over the Last 25 Years
The next chart is a smaller time period, it’s from December 27, 2022, until October 27, 2025. It shows what would happen to $100k invested in the S&P 500 if you were in the market the entire time, if you missed the best 5 days and if you missed the worst 5 days. Yes, missing the worst 5 days gives you the best performance but the biggest difference is made by missing the best 5 days.
The Effect of Missing the Best and Worst Days of 2023
So why don’t more people time the market and get out before the large down days and make sure they are in during the large up days? Wouldn’t it be easy to get out of the market when it starts to roll over and then get back in once all the losses are done?
Volatility Comes in Pairs
When looking at the largest daily percentage change per year since 2000, you will see that there are at least 4 times that these swings are just days apart. So, can you time the market if the largest swing of the year is inside a few days? The answer consistently is no.
List of largest daily changes in the S&P 500 Index - Wikipedia
So, what does this all mean? It argues for understanding your risk tolerance so that you can stay invested through the market’s swings. Talking with your financial advisor about your risk tolerance is an important thing to do so that you can enjoy what the stock market offers.
Financial Planning/Investment Strategy Corner:
Getting Ready for Year-End Planning
We are now one-third of the way through the 4th quarter - it’s time to start looking at year-end planning. Here are a few items to think about:
- Has your Required Minimum Distribution (RMD) been satisfied?
- Have you processed the Qualified Charitable Distributions (QCDs) from your RMD that you planned on?
- Is your charitable giving complete for the year?
- Do you have any family giving for the year? (2025’s giving exclusion is $19k per recipient)
- Have you reviewed your 401k contributions for 2025?
- Considering a Roth conversion for 2025?
Feel free to reach out to your advisor with questions about any of these.
Best of the 207:
We’re honored to be nominated again in the Wealth Management and Financial Planner categories! Thank you for your continued support — your votes mean the world to us. Here is a link to the voting page and a QR code in case the mood strikes you. Robinson Smith Wealth Advisors
Quick Hits:
- 👻Halloween Fun: Looking for plans?: Maine Halloween Events & Activities NH Halloween Events Guide
- 🦃 Thanksgiving Inspiration: Thanksgiving Charcuterie Board Thanksgiving Bon Appétit
- 🎈 Parade Trivia: The Macy’s Parade started 101 years ago! The Macy’s Thanksgiving Day Parade Amazing Vintage Photos
- 🌲 Outdoor Living: Living in Maine reminds us that time outdoors is a gift. Axios Finish Line
One Last Thought:
With a damaging hurricane and a government shutdown pausing SNAP benefits, it’s easy to feel powerless. Here are some organizations helping those in need.
- Wayside Food Programs Wayside Food Programs
- Good Shepherd Good Shepherd Food Bank
- Making It Home Distributing housewares to those in need | Southern Maine
- Preble Street Preble Street
- New Hampshire Food Bank New Hampshire Food Bank
- World Central Kitchen World Central Kitchen
A Couple Halloween Quotes:
- "There are three things I've learned never to discuss with people: religion, politics, and the Great Pumpkin.” Linus, It’s the Great Pumpkin, Charlie Brown
- "We make up horrors to help us cope with the real ones.” Stephen King
Thank You for Reading
Thank you for being part of the RSWA community and for reading Financial Advisor Insights! We welcome your feedback — and please share this with a friend or colleague who might enjoy it.
Stay safe, stay invested, and enjoy a Happy Halloween! 🎃
