Connect with us

Markets

Timing the Market: Why It’s So Hard, in One Chart

Published

on

Subscribe to the Advisor Channel free mailing list for more like this

Timing the Market: Why It's So Hard, in One Chart

Can I share this graphic?
Yes. Visualizations are free to share and post in their original form across the web—even for publishers. Please link back to this page and attribute Visual Capitalist.
When do I need a license?
Licenses are required for some commercial uses, translations, or layout modifications. You can even whitelabel our visualizations. Explore your options.
Interested in this piece?
Click here to license this visualization.

The Risks and Rewards of Timing the Market

This was originally posted on Advisor Channel. Sign up to the free mailing list to get beautiful visualizations on financial markets that help advisors and their clients.

Timing the market seems simple enough: buy when prices are low and sell when they’re high.

But there is clear evidence that market timing is difficult. Often, investors will sell early, missing out on a stock market rally. It can also be unnerving to invest when the market is flashing red.

By contrast, staying invested through highs and lows has generated competitive returns, especially over longer periods.

The above graphic shows how trying to time the market can take a bite out of your portfolio value, using 20 years of data from JP Morgan.

The Pitfalls of Timing the Market

Mistiming the market even by just a few days can significantly affect an investor’s returns.

The following scenarios compare the total returns of a $10,000 investment in the S&P 500 between January 1, 2003 and December 30, 2022. Specifically, it highlights the impact of missing the best days in the market compared to sticking to a long-term investment plan.

Portfolio ValueAnnual Return (2003-2022)
Invested All Days$64,844+9.8%
Missed 10 Best Days$29,708+5.6%
Missed 20 Best Days$17,826+2.9%
Missed 30 Best Days$11,701+0.8%
Missed 40 Best Days$8,048-1.1%
Missed 50 Best Days$5,746-2.7%
Missed 60 Best Days$4,205-4.2%

As we can see in the above table, the original investment grew over sixfold if an investor was fully invested for all days.

If an investor were to simply miss the 10 best days in the market, they would have shed over 50% of their end portfolio value. The investor would finish with a portfolio of only $29,708, compared to $64,844 if they had just stayed put.

Making matters worse, by missing 60 of the best days, they would have lost a striking 93% in value compared to what the portfolio would be worth if they had simply stayed invested.

Overall, an investor would have seen almost 10% in average annual returns using a buy-and-hold strategy. Average annual returns entered negative territory once they missed the 40 best days over the time frame.

The Best Days in the Market

Why is timing the market so hard? Often, the best days take place during bear markets.

RankDateReturn
1Oct 13, 2008+12%
2Oct 28, 2008+11%
3Mar 24, 2020+9%
4Mar 13, 2020+9%
5Mar 23, 2009+7%
6Apr 6, 2020+7%
7Nov 13, 2008+7%
8Nov 24, 2008+7%
9Mar 10, 2009+6%
10Nov 21, 2008+6%

Over the last 20 years, seven of the 10 best days happened when the market was in bear market territory.

Adding to this, many of the best days take place shortly after the worst days. In 2020, the second-best day fell right after the second-worst day that year. Similarly, in 2015, the best day of the year occurred two days after its worst day.

Interestingly, the worst days in the market typically occurred in bull markets.

Why Staying Invested Benefits Investors

As historical data shows, the best days happen during market turmoil and periods of heightened market volatility. In missing the best days in the market, an investor risks losing out on meaningful return appreciation over the long run.

Not only does timing the market take considerable skill, it involves temperament, and a consistent track record. If there were bullet-proof signals for timing the market, they would be used by everyone.

Click for Comments

Agriculture

The World’s Top Cocoa Producing Countries

Here are the largest cocoa producing countries globally—from Côte d’Ivoire to Brazil—as cocoa prices hit record highs.

Published

on

This tree map graphic shows the world's biggest cocoa producers.

The World’s Top Cocoa Producing Countries

This was originally posted on our Voronoi app. Download the app for free on iOS or Android and discover incredible data-driven charts from a variety of trusted sources.

West Africa is home to the largest cocoa producing countries worldwide, with 3.9 million tonnes of production in 2022.

In fact, there are about one million farmers in Côte d’Ivoire supplying cocoa to key customers such as Nestlé, Mars, and Hershey. But the massive influence of this industry has led to significant forest loss to plant cocoa trees.

This graphic shows the leading producers of cocoa, based on data from the UN FAO.

Global Hotspots for Cocoa Production

Below, we break down the top cocoa producing countries as of 2022:

Country2022 Production, Tonnes
🇨🇮 Côte d'Ivoire2.2M
🇬🇭 Ghana1.1M
🇮🇩 Indonesia667K
🇪🇨 Ecuador337K
🇨🇲 Cameroon300K
🇳🇬 Nigeria280K
🇧🇷 Brazil274K
🇵🇪 Peru171K
🇩🇴 Dominican Republic76K
🌍 Other386K

With 2.2 million tonnes of cocoa in 2022, Côte d’Ivoire is the world’s largest producer, accounting for a third of the global total.

For many reasons, the cocoa trade in Côte d’Ivoire and Western Africa has been controversial. Often, farmers make about 5% of the retail price of a chocolate bar, and earn $1.20 each day. Adding to this, roughly a third of cocoa farms operate on forests that are meant to be protected.

As the third largest producer, Indonesia produced 667,000 tonnes of cocoa with the U.S., Malaysia, and Singapore as major importers. Overall, small-scale farmers produce 95% of cocoa in the country, but face several challenges such as low pay and unwanted impacts from climate change. Alongside aging trees in the country, these setbacks have led productivity to decline.

In South America, major producers include Ecuador and Brazil. In the early 1900s, Ecuador was the world’s largest cocoa producing country, however shifts in the global marketplace and crop disease led its position to fall. Today, the country is most known for its high-grade single-origin chocolate, with farms seen across the Amazon rainforest.

Altogether, global cocoa production reached 6.5 million tonnes, supported by strong demand. On average, the market has grown 3% annually over the last several decades.

Continue Reading

Subscribe

Popular