Market Timing XEQT: What Missing the Best 10 Days Actually Costs You

My buddy Dave is the smartest person I know. Electrical engineer. Reads whitepapers for fun. Built his own standing desk from raw lumber because the store-bought ones “weren’t optimized.” When Dave decides to learn something, he goes deep.

So when Dave told me in late 2019 that he’d developed a system for timing the market, I was genuinely intrigued. He’d been backtesting moving averages, reading VIX charts, tracking put-call ratios. He had spreadsheets with conditional formatting. He had a Discord server. He was convinced he’d found an edge.

Then COVID hit.

Dave’s system told him to sell in late February 2020 – and he did. He was out before the worst of the crash, and for about three weeks, Dave was an absolute genius. He’d call me practically giddy. “I told you. The system works. I’m sitting in cash watching the world burn.” He was right. He’d timed the exit almost perfectly.

The problem was the re-entry. His system kept telling him “not yet.” The market was still volatile. The VIX was still elevated. The charts were ugly. So Dave waited. He waited through March. He waited through April. He waited as the market roared back 30% from its lows. By mid-May, his system finally gave a buy signal – but by then, XEQT had already recovered most of the drop. Dave got back in almost exactly where he’d gotten out.

All that stress. All those spreadsheets. All that backtesting. And his net result was approximately zero – minus the capital gains tax he’d triggered on the sell. He would have been better off doing literally nothing.

Dave doesn’t talk about his system anymore.

What happened to Dave is not unusual. It is, in fact, the most predictable outcome of market timing. And today I want to show you exactly why, with the specific numbers that prove it – starting with the single most devastating statistic in all of investing.

1. The “Missing the Best Days” Problem: The Numbers That Should End the Debate

This is the fact that, once you understand it, makes market timing feel less like a strategy and more like gambling with a loaded die pointed at your face.

Let’s say you invested $10,000 in a globally diversified equity portfolio – something with the same allocation as XEQT – at the beginning of 2003 and left it completely alone for 20 years, through 2022. You didn’t touch it. You didn’t panic. You went about your life.

Here’s how your $10,000 would have grown under different scenarios:

Read that table one more time. Missing just the 10 best trading days out of roughly 5,036 total trading days cut your returns by more than half. Missing 30 best days – six weeks of trading in a 20-year period – turned a near-10% annual return into basically breaking even. Missing 40 turned a gain into an actual loss.

That is the cost of being wrong about market timing. Not wrong all the time. Not wrong on every trade. Wrong on a handful of days across two decades.

And here is the part that turns this from a cautionary statistic into an absolute condemnation of market timing: you cannot predict which days those will be. Nobody can. No system can. No algorithm, no guru, no Discord server, and no VIX chart can tell you in advance which random Tuesday is going to be the third-best day of the decade.

The Canadian Numbers Tell the Same Story

These figures above are based on S&P 500 data, which is the most commonly studied. But the pattern holds for Canadian markets as well.

A study by RBC Global Asset Management looked at the S&P/TSX Composite from 1986 to 2021 and found strikingly similar results:

The conclusion is the same whether you are investing in the U.S., Canada, or globally: missing a tiny handful of the best days devastates your long-term returns. And since XEQT holds all of these markets, the principle applies directly to every dollar you have in it.

2. Why the Best Days Come Right After the Worst Days

This is the part that truly seals the case against market timing. It is not just that the best days are unpredictable. It is that the best days tend to cluster around the worst days. They happen precisely when the market feels most dangerous, most hopeless, and most certain to keep falling.

JPMorgan’s annual Guide to the Markets has published this analysis for years, and it consistently shows that six of the 10 best trading days in any given 20-year period occurred within two weeks of the 10 worst days.

Let that sink in. The best days and the worst days are not scattered randomly across the calendar. They are neighbours. They live in the same terrifying weeks, often separated by just one or two trading sessions.

Here are some real examples:

Look at March 12-13, 2020. The market fell almost 10% on Thursday and then rose almost 10% on Friday. If you sold in panic on Thursday evening – which would have been the most natural, most human, most understandable thing to do – you would have missed one of the best single-day returns in market history, which happened the very next morning.

This is why market timing is not just difficult. It is structurally disadvantaged. To successfully time the market, you need to be right twice: you need to sell before the drop and buy back before the recovery. The data shows that the recovery begins almost immediately after the worst of the drop, often before any “all clear” signal appears in the news, in the charts, or in your gut. By the time it feels safe to get back in, the best days have already passed.

3. The Emotional Cycle of Market Timing (And Why It Always Ends the Same Way)

If market timing were purely a mathematical exercise, maybe some very disciplined people could make it work. But it is not. It is an emotional exercise, and that is what makes it so consistently destructive.

Here is how the cycle plays out for virtually every market timer, every single time:

Step 1: The Warning Signs. Markets have been volatile. Headlines are negative. There’s a recession call from some bank. Your portfolio has been flat or slightly down for a few months. Anxiety begins to build.

Step 2: The Exit. You sell. Maybe all at once, maybe gradually. You move to cash or to a money market fund or to a GIC. There is immediate relief. The knot in your stomach loosens. You feel smart, proactive, in control. This feeling is intoxicating.

Step 3: The Vindication. The market drops further after you sold. This is the most dangerous moment of the entire cycle, because it tells your brain that it was right. “I knew it. I called it.” You screenshot your portfolio balance and send it to your friends. You feel like a genius.

Step 4: The Waiting. Now you need to decide when to get back in. But the market is still falling, or it is choppy and uncertain. “I’ll wait a bit longer. No need to rush back in.” Every dip feels like it could be the start of another leg down. The uncertainty that made you sell in the first place has not gone away – it has intensified.

Step 5: The Rally You Don’t Trust. The market starts recovering. But it does not feel like a real recovery. “It’s just a dead-cat bounce.” “The fundamentals haven’t changed.” “The other shoe hasn’t dropped yet.” You stay in cash, watching the market climb, telling yourself it will come back down and you’ll buy then.

Step 6: The Denial. The market keeps climbing. Your cash position is now underperforming your old portfolio. But you cannot bring yourself to buy back in at a higher price than where you sold. That would mean admitting you were wrong. So you keep waiting. “It has to come back down.”

Step 7: The Capitulation. Eventually – weeks, months, sometimes years later – you give up and buy back in. Usually near a new high, usually after the recovery is mostly or entirely complete. You lock in the loss. You have achieved the exact opposite of what you intended.

I have seen this cycle play out dozens of times with friends, family members, and people in online investing communities. The specific stocks or ETFs change. The crisis of the moment changes. The outcome is always the same.

4. What the Academic Research Actually Says

This is not a debate in academic finance. The evidence is overwhelming and one-sided.

The Sharpe Study

Nobel laureate William Sharpe published a landmark paper in 1975 called “Likely Gains from Market Timing.” His conclusion was straightforward: a market timer would need to be correct on their calls at least 74% of the time just to match a buy-and-hold strategy. Not to beat it – to match it.

Think about that. You need to correctly predict the direction of the market roughly three out of every four times just to break even with someone who does nothing at all. The few published track records of professional market timers suggest accuracy rates closer to 50% – which is the same as flipping a coin.

The Dalbar Study

Every year, DALBAR Inc. publishes the Quantitative Analysis of Investor Behavior. Over the 30 years ending in 2023, the average equity fund investor earned roughly 7.0% annualized while the S&P 500 itself returned roughly 10.5% annualized. That 3.5% annual gap is almost entirely attributable to bad timing – buying after rallies, selling after declines, and sitting on the sidelines during recoveries.

Over 30 years, a 3.5% annual drag on a $100,000 portfolio is the difference between ending up with roughly $1.8 million (at 10.5%) and $760,000 (at 7.0%). That is over a million dollars in lost wealth, not from picking bad investments, but from trying to be clever with timing.

Vanguard’s Research

Vanguard has published multiple papers on market timing, and their conclusions are consistent. One analysis found that even if an investor had perfect knowledge that a bear market was coming, staying invested still outperformed going to cash in most scenarios – because the cost of being out of the market during the early stages of the subsequent recovery exceeded the benefit of avoiding the late stages of the decline.

In their words: “Time in the market is far more important than timing the market.”

The CFA Institute

A comprehensive study from the CFA Institute analyzed market timing across 15 international markets over 114 years. The finding: in virtually every country and every time period studied, a buy-and-hold strategy outperformed a market-timing strategy, even when the timing strategy was given generous assumptions about accuracy.

The academic consensus is not “timing the market is hard.” It is “timing the market is a losing strategy for virtually all investors, virtually all the time, even those with above-average skill.”

5. Real-World Evidence: COVID 2020 and the 2022 Correction

Theory is one thing. Let’s look at what actually happened to real investors during the two most recent market crises.

The COVID Crash (February-March 2020)

The S&P 500 dropped roughly 34% in about five weeks. It was the fastest 30%+ decline in history. Global markets, including the Canadian market that XEQT holds, fell in near-perfect unison.

Here is the timeline that matters:

• February 19, 2020: Market peaks.
• March 23, 2020: Market hits bottom, down 34%.
• August 18, 2020: Market fully recovers to pre-crash levels.

The total round trip – peak to trough to full recovery – took about six months. But here is the critical detail: the bulk of the recovery happened in the first three weeks. From the March 23 bottom to April 14, the market rallied roughly 28%. If you sold on March 23 and waited even three weeks to buy back in, you missed the majority of the recovery.

XEQT investors who did nothing – who kept holding and kept contributing – saw their portfolios fully recover by late summer 2020 and then continue to climb to new highs. Many of them, the ones who were dollar-cost averaging through the crash, ended up with more units at lower prices, turbocharging their subsequent returns.

XEQT investors who sold near the bottom and waited for “clarity” before getting back in? Many of them are still behind where they would have been. Some are still sitting in cash.

The 2022 Bear Market

This one was different. There was no sudden crash – it was a slow, grinding decline driven by inflation, rising interest rates, and the war in Ukraine. The S&P 500 dropped roughly 25% from January to October 2022. The Canadian market and international markets in XEQT followed a similar pattern.

The recovery was also slower. It took until early 2024 for the S&P 500 to fully recover its 2022 losses.

But the “missing the best days” dynamic played out exactly as it always does. The best single days of 2022 occurred during the worst months:

Every one of these big up days happened during periods when the headlines were apocalyptic, when social media was full of “this time it’s different” takes, and when every instinct told you to stay away from stocks. If you were sitting in cash because you’d timed your exit earlier in the year, you missed these days. And those missed days compounded into a significantly worse outcome.

6. How Dollar-Cost Averaging Into XEQT Eliminates Timing Risk

If market timing is a losing game, the winning move is to remove the timing variable entirely. And the most effective way to do that is dollar-cost averaging (DCA) – investing a fixed amount at regular intervals, regardless of what the market is doing.

When you set up automatic contributions to XEQT – say, $500 every two weeks on payday – you accomplish several things simultaneously:

You buy more when prices are low. When XEQT drops from $30 to $25, your $500 buys 20 units instead of 16.7. You are automatically buying the dip without having to predict it, time it, or psych yourself up to do it.

You buy less when prices are high. When XEQT rises from $30 to $35, your $500 buys 14.3 units instead of 16.7. You are automatically reducing your exposure at higher prices.

You remove emotion from the equation. There is no decision to make on any given payday. The money goes in automatically. You do not check the chart. You do not read the headlines. You do not consult a Discord server. The process is mechanical, consistent, and immune to the emotional cycle I described in section 3.

You guarantee participation in the best days. Since you are always invested, you will never miss those critical rally days that drive the majority of long-term returns. You cannot miss the best 10 days if you are in the market every day.

Here is a comparison to illustrate:

The DCA investor does not need to be smart, brave, or analytical. They need to be consistent. That’s it. The market timer needs to be right 74%+ of the time – a hurdle that has defeated Nobel laureates, hedge fund managers, and your uncle who keeps talking about his trading system at Thanksgiving.

7. “Time in the Market Beats Timing the Market” – The Data

You have heard this phrase before. It has become a cliche. But cliches become cliches because they are true, and this one has more empirical support than almost any other statement in personal finance.

Here is one way to think about it. Fidelity Investments conducted an internal study of their best-performing accounts to find out what those investors had in common. The common thread? They had forgotten they had accounts. Literally. The best performers were people who had opened an account, set up automatic contributions, and then either died or forgotten the account existed. They outperformed every active strategy, every timing system, and every professional manager – by doing nothing.

Let’s put some Canadian numbers to it. If you had invested $10,000 in a globally diversified portfolio (similar to XEQT) at any point in the last 30 years and held for at least 15 years, your chance of having a positive return was essentially 100%. Not 95%. Not 99%. One hundred percent. Over every rolling 15-year period in the modern history of global stock markets, a diversified equity portfolio has produced a positive total return.

Now consider the market timer. They need to get in at the right time and out at the right time, repeatedly, for decades. Each incorrect call costs them. Each day spent in cash during a rally costs them. The math compounds against them relentlessly.

Here’s a concrete example:

Notice that even the “average” timer – someone who gets some calls right – still underperforms the person who simply stayed invested. The only strategy that beats buy-and-hold is perfect timing, which does not exist outside of backtesting. In the real world, with real emotions, real headlines, and real uncertainty, the buy-and-hold investor wins.

8. What You Should Do Instead of Timing the Market

If you have read this far, the logical question is: “Okay, I’m convinced. What do I actually do?”

The answer is almost comically simple, which is part of why people resist it. We are wired to believe that good outcomes require complex strategies. In investing, the opposite is true.

Step 1: Pick your investment. If you are reading this blog, XEQT is likely a strong candidate. It gives you instant diversification across 49 countries, over 9,000 stocks, and four asset classes. One ETF. Zero decisions about allocation, rebalancing, or stock selection.

Step 2: Set up automatic contributions. Whether it is $100 a month or $2,000 a month, the number matters less than the consistency. Set it up through your brokerage. Match it to your pay schedule. Make it automatic so you do not have to think about it.

Step 3: Do not check your portfolio constantly. Every time you open your brokerage app during a downturn, you are giving your emotional brain ammunition to override your rational brain. Check quarterly if you must. Monthly is better. Less than that is best.

Step 4: When the market drops, do nothing. Nothing. Do not sell. Do not reduce contributions. If anything, consider increasing contributions temporarily to take advantage of lower prices. But the baseline instruction is: do nothing different.

Step 5: When the market rallies, do nothing. Same instruction. Do not suddenly pour extra money in because of FOMO. Do not change your allocation. Stick to the plan.

The goal is to make your investment strategy so boring, so automatic, and so hands-off that there is simply no opportunity for your emotional brain to intervene. The less you interact with your portfolio, the better it will perform. This is one of the rare areas in life where effort and outcome are inversely correlated.

9. But What If I Know a Crash Is Coming?

You don’t.

I know that sounds dismissive, so let me elaborate. You might feel very strongly that a crash is coming. You might have read compelling articles about inverted yield curves, overvalued price-to-earnings ratios, unsustainable debt levels, or geopolitical risks. You might have noticed that every cab driver is talking about stocks, which is supposed to be a sign of a top.

Here’s the thing: people have felt very strongly that a crash was coming in virtually every year of the past three decades. Some of them were eventually right – but being right about the direction of a move means nothing if you are wrong about the timing.

Someone who predicted a crash in 2015 and went to cash was “right” that a crash eventually came – in 2020. But they missed five years of gains waiting for it. By the time the crash happened, the market’s pre-crash level was still far above where they’d exited. They were right about the what and catastrophically wrong about the when.

Predicting a crash is worthless without predicting when it will happen and when it will end. Nobody in the history of finance has consistently done both.

As the legendary investor Peter Lynch once said: “Far more money has been lost by investors trying to anticipate corrections than has been lost in the corrections themselves.”

10. The One Chart That Should Be Your Investing North Star

If I could tattoo one chart on the inside of every Canadian investor’s eyelids, it would be this one: the long-term growth of a globally diversified equity portfolio, with all the crashes clearly marked.

When you zoom out to a 30-year or 50-year view, something remarkable happens. The crashes – even the terrifying ones, even 2008, even COVID – look like minor dips on an unmistakable upward trajectory. The line goes from the bottom-left to the top-right. Always. Through wars, pandemics, financial crises, political upheaval, and every other catastrophe humans have inflicted on each other and the economy.

The market timers are trying to dance around the dips. The buy-and-hold investors are riding the line. Over any meaningful time horizon, the riders win.

XEQT gives you the entire line. All 49 countries. All 9,000+ stocks. All sectors, all regions, all sizes. When you hold XEQT, you are not betting on any single company, country, or economic outcome. You are betting that the global economy will continue to grow over the next 20, 30, 40 years. And that bet has paid off in every multi-decade period in modern history, regardless of what happened in the short term.

The cost of timing the market is not just the days you miss. It is the stress, the anxiety, the second-guessing, the tax consequences, the spreadsheets at midnight, and the Discord servers at 6 AM. It is the erosion of the simple, quiet confidence that comes from knowing your plan is sound and your money is working.

Dave is back to buying XEQT every payday now. He deleted the spreadsheets. He left the Discord. He told me the other day that his portfolio has never performed better, and he has never thought about it less. He finally understands what the data has been screaming for decades: the best market timing strategy is not having one.