The Case
Trying to time your entry or exit into an investment is a risky business, so the 'best idea' is simply not to worry about the day you invest or sell on and focus on the years you invest in.
The Evidence
In the 10 years to 31 March 2008, the annualised return for the S&P/ASX All Ordinaries Accumulation Index was 11.41% pa. If you remove the five best performing days over that period that return drops to 9.13% pa. Remove the best 30 days over those 10 years, the annualised return drops to 2.86% pa.
Ten years less 30 best days - 2.86% pa.
Ten years less 20 best days - 4.97% pa
Ten years less 10 best days - 7.53% pa
Ten years less 5 best days - 9.13% pa
Ten years - 11.41% pa
Source of data: IRESS, Colonial First State. All Ordinaries Accumulation Index used. Returns are expressed in per annum terms.
The Conclusion
"Nobody" could have predicted when those best days were going to occur so therefore the only way you could have taken advantage of them was to be invested in the market for the full 10 years.
Disclaimer: This is not investment advice. This is an investment theory. We highly recommend that you consult a professional, qualified financial adviser.
Past performance is no indication of future performance.