Stay on Target. Stay the course. Remain on track. 

Known by many names, those three words mean the same in all universes. 

During times of volatility and uncertainty, Fundstrat Head of Research Tom Lee often ends his notes and Macro Minute videos by reminding investors to “stay on target.” Many readers have written in to ask what he means by that.

Like many of us, Tom is a Star Wars fan. But it’s not the engineering vulnerabilities in the Death Star that Tom is thinking about when he provides this critical guidance. It’s investment strategy.

Our data-science team put the power of the Force to work, doing a historical analysis of stock-market performance going all the way back to 1928. In any given year, the stock market makes most of its gains in the 10 best trading days of that year. Historically, missing out on those 10 best days would have resulted in a tremendous opportunity cost that resulted in significantly inferior returns:

Some might question whether this maxim still holds true. After all, in many ways, financial markets have evolved and changed since 1928. But over the past 15 years, the “10 best days” rule has continued to apply.

The obvious suggestion would be to only trade on those 10 best days each year. On Wall Street, that would count as “timing the market,” and trying to time the market is generally compared to trying to catch a falling knife (something your parents hopefully taught you NEVER to attempt.)

Yet during times when trading is choppy and the markets are volatile, the constant buzz of alarmist news headlines might tempt you to forget your carefully crafted investment strategy  and try – just this once – to time the market, exiting to avoid the declines with the intention of re-entering when they start to climb again. That temptation can be strong sometimes, especially when you’re nervous or fearful. 

To Lee, however, that would be like giving into the Dark Side. Instead, use the Force – and stay on target.