Large long-term gains in the markets can be accounted for by a relatively small number of particularly good days. This makes it especially important for clients to stay invested.

If you missed the best one percent of days to invest in the S&P 500 since the beginning of 1960 through December 31, 2001, your total return would have fallen from +1,816.34% to -35.57% . In dollar terms, if you started with $10,000, that means instead of having $191,634.12 (including the original $10,000) today, you would be left with only $6,442.51 .

Many of the best days on the S&P 500 occurred soon after the worst days. In fact, the best two days of the S&P 500 occurred the day after the worst, October 19, 1987, also known as “Black Monday.” How many investors move to the sidelines after a bad day? A lot! According to the Investment Company Institute's official survey of the U.S. mutual fund industry, net equity fund sales for the month of September 2001 were U.S. -$29.51 billion. This was largely due to the tragic events in the United States of September 11, resulting in the largest ever one-month outflow of stock mutual funds in dollar terms. The largest monthly outflow, measured as a percentage of assets was the U.S. $7.48 billion recorded in October 1987 which accounted for 3.1% of mutual fund assets.

Best and Worst Performing Days of the S&P 500 Index

Bad Days			Good Days
Oct. 19, 1987	-20.47%		Oct. 20, 1987	5.33%
			Oct. 21, 1987	9.10%
			Oct. 29, 1987	4.93%
Mar. 12, 2001	-4.32%		Mar. 27, 2001	2.56%
			Apr. 05, 2001	4.37%
Sept. 17, 2001	-4.92%		Sept. 20, 2001	3.11%
			Sept. 24, 2001	3.90%

Monthly U.S. Equity Mutual Fund Sales

	Largest Outflows
Date	(in $U.S. billions)	% of Assets
Oct. 1987	-$7.48	3.10%
Mar. 2001	-$20.67	0.56%
Sept. 2001	-$29.51	0.87%

This, Too, Shall Pass
Large long-term gains in the markets can be accounted for by a relatively small number of particularly good days. Many of these days occur soon after the bad days that cause investors to jump out of the market. Don't compound the bad day by letting fear take over, moving you to the sidelines and causing you to miss the effect of the good day rebound.

For more information, please feel free to contact me at john.klotz@northwoodmortgage.com or call 416-969-8130 ext. 230