Despite the S&P 500's 14% increase this year, only 8 days account for the gains.

Although the S&P 500 has increased by 14% this year, only eight trading days account for the majority of the growth.

The S&P 500 year to date data shows that market timing is not an effective investment strategy.

Despite having only 11 more up days than down days this year (113 up, 102 down), the S&P 500 has increased by 14% year to date, according to Nicholas Colas at DataTrek.

The S&P has increased by 14%, but the number of up days is roughly equivalent to the number of down days. Simply stating "there's been a rally in big cap tech" does not fully capture the complexity of the situation.

The majority of the gains can be attributed to eight days, all of which are linked to the major news stories of the year: big tech, the banking crisis, interest rates/Federal Reserve, and avoiding recession.

S&P 500: biggest gains this year

• January 6         +2.3%  (weak jobs report)
• April 27           +2.0%  (META/Facebook shares rally on better than expected earnings)
• Netflix exceeded expectations with its Q4 sub growth, while big tech stocks surged.
• November 2    +1.9%  (10 year Treasury yields decline after Fed meeting)
• On May 5, Apple's earnings were strong, and banks rallied after JP Morgan upgraded its outlook.
• First Republic received deposits from a consortium of large banks on March 16, resulting in a 1.8% increase.
• Bank regulators guaranteed deposits at SVB and Signature Bank on March 14, resulting in a 1.6% increase.
• March 3             +1.6%  (10-year Treasury yields drop below 4%)

Source: DataTrek

According to Colas, the big issues such as big cap tech, interest rates, and avoiding recession are still relevant and are likely to cause a further U.S. equity rally.

If you had not been in the markets during those eight days, your returns would have been significantly lower.

Why market timing does not work

Market timing, the belief that one can accurately predict stock price movements and profit from it, is a strategy that has been proven unsuccessful for stock investors.

If an investor had not been present during the eight best days, returns would have been significantly different.

For every year, it is not only true for 2023.

An ideal strategy for owning stocks is to invest money when prices are low, sell when they are high, and then buy again when prices are low in an endless cycle.

No one has consistently identified market tops and bottoms, and the cost of missing out on crucial trading days can significantly harm a long-term portfolio.

In my book "Shut Up and Keep Talking: Lessons on Life and Investing from the Floor of the New York Stock Exchange," I dedicate a chapter to the argument that market timing is ineffective.

An example of a 50-year investment in the S&P 500.

Hypothetical growth of $1,000 invested in the S&P 500 in 1970

(through August 2019)

• Total return                                 $138,908
• Minus the best performing day $124,491
• Minus the best 5 days                $90,171
• Minus the best 15 days             $52,246
• Minus the best 25 days             $32,763

Source: Dimensional Funds

If you miss the best day in the last 50 years, you will lose more than $14,000, which is 10% of your earnings.

Miss the best 15 days, and you have 35% less money.

Not being in the market on the best days would have made returns lower.

But no one knows when those days will occur.

The probability of making both correct decisions and outperforming the market is extremely low.

Consistent investing and understanding your own risk tolerance are the key to investing, not market timing.