Stop Focusing On Daily Returns

Not only will focusing on daily returns likely drive you crazy, but it’s nearly impossible to draw an inference as to how coming months, quarters, or years may play out when it comes to overall positive or negative market performance. In fact, looking at the S&P 500 Index daily returns from 1980-2022, eleven of the 20 worst trading days occurred in years with positive total returns, and ten of the 20 best trading days occurred in years with negative total returns.

Check out this playable graphic from Vanguard displaying how noisy daily returns can be:

I bet you may not have guessed, after watching the above clip, that the total return of the S&P 500 Index was up 11.52% annualized during that time period from 1980-2022. But it was, and it was not the only index that had significantly positive performance over that time period. Many other major stock indices were up similarly: