Portfolio Management | February 28, 2020

Why Waiting for a Market Rebound Could Cost You

There’s nothing like a stock market correction to scare off investors and trigger panic selling at record pace.

“The problem with selling when the market takes a dive is that by the time you act, the worst may already be behind you,” says Mark Riepe, head of the Schwab Center for Financial Research.

The risk here is double-edged: If you sell during a slump, you could lock in your losses. And if you’re sitting on the sidelines, you may also miss out. Analysts at the Schwab Center for Financial Research studied the five periods since 1970 when stocks—as measured by the S&P 500® Total Return Index—fell 20% or more. They found stocks generated their biggest gains in the first 12 months of the recovery, and that missing even the first month of gains after the market hit bottom led to substantially lower returns over time.

The early bird gets the return

Waiting to jump back into the market even a month after it hits bottom can lead to significantly lower gains over time.


Cumulative returns following market bottom


1 year later

2 years later

3 years later

Stayed fully invested through bear market




Moved investments into cash for 1 month




Moved investments into cash for 3 months




Moved investments into cash for 6 months




Source: Schwab Center for Financial Research and Morningstar. Data from 01/1970 through 12/2017. Market returns are represented by the S&P 500 Total Return Index, and cash returns are represented by the total returns of the Ibbotson U.S. 30-Day Treasury Bill Index. Cumulative returns are calculated using the simple average of returns from each period and scenario. The example is hypothetical and provided for illustrative purposes only and the example does not reflect the effects of taxes or fees. Past performance is no guarantee of future results.

“As investors, we often wait to make sure it’s safe to go back in the water,” Mark says. “But the idea that you can simply wait for all the positive news to come out and still enjoy robust returns just isn’t true.”

Then again, it needn’t be an all-or-nothing decision. “Consider putting even half your money back to work,” Mark says. “That way, you’re less likely to regret it whether the market goes up or down.”

What You Can Do Next

  • Learn why time in the market is more important than timing the market.

  • A CERTIFIED FINANCIAL PLANNER™ professional can help you develop a sound investment strategy to help your portfolio weather the market’s ups and downs. Learn more.