The Power of a Few Days

How a Handful of Trading Days Drive Long-Term Market Returns

Investors often think of market returns as something that accumulates gradually—day after day, year after year. In reality, market returns are highly concentrated.

Using daily U.S. Total Stock Market data, we can measure how much of each year’s performance came from just the five best trading days of that year. The results are striking—and explain why staying invested during uncomfortable periods matters far more than trying to time markets.

What We Measured

For each calendar year in the dataset:

• We identified the five best daily returns within that year

• We compounded those five days (not summed them)

• We measured how much return those days produced on their own

This isolates a simple but powerful question:

How much of the market’s return comes from only a handful of days?

The Compounded Return of the 5 Best Days

Across history, the five best days in a year often delivered double-digit returns by themselves. In some of the most volatile periods, the concentration was extreme:

• Late-1920s and early-1930s markets

• The Global Financial Crisis

• The 2020 pandemic shock

But even in relatively calm years, the best five days frequently accounted for 10–20% of returns. This is not an anomaly. It is a recurring feature of how markets generate gains.

Compounded Return of the 5 Best Trading Days Each Year

In many years, just five days accounted for a large portion of total market gains. This chart shows the compounded return of the five best days in a year for each year between 1926 and 2025.

Where the Best Days Tend to Occur

The most important insight is when these powerful days show up. Historically, the strongest market days:

• Cluster around periods of fear and uncertainty

• Occur during or shortly after drawdowns

• Appear when headlines are most negative, and sentiment is weakest

In other words, the days that matter most tend to arrive when investors least feel comfortable being invested. This directly connects to earlier posts in this series of blogs:

• The Cost of Sitting in Cash After a Decline

• Daily Losses vs Long-Term Outcomes

The same environments that tempt investors to wait for clarity are the environments most likely to deliver outsized gains.

Why Missing a Few Days Matters So Much

Because returns compound, missing even a few strong days can materially change long-term outcomes. Market timing rarely fails because investors miss entire years—it fails because they miss a handful of critical days. Those days:

• Are unpredictable

• Are tightly clustered

• Often occur amid volatility and bad news

This makes them almost impossible to capture without remaining invested.

The Illusion of Control

Short-term decision-making creates a false sense of control:

• “I’ll get back in once things stabilize.”

• “I’ll wait until volatility subsides.”

• “I’ll re-enter when the outlook improves.”

Historically, those moments of apparent clarity tend to arrive after many of the strongest days have already passed. By then, a meaningful portion of the recovery is gone.

Connecting the Evidence

Viewed together, the evidence across this series tells a consistent story:

• Drawdowns feel severe, but usually recover

• Waiting in cash has a measurable cost

• Risk shrinks with time

• Returns are concentrated in surprisingly few days

None of this implies markets rise smoothly or without stress. It simply reflects how returns are actually delivered.

The Takeaway

Long-term market returns are driven by a small number of powerful days.

The challenge is that those days are:

• Impossible to predict

• Easy to miss

• Most likely to occur during uncomfortable periods

Which leads to a simple—but difficult—conclusion:

The discipline to stay invested matters more than the ability to time markets.

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Dr. Andy Lawson is the principal of Freshfield Investments, a Registered Investment Advisory firm in Plano, Texas serving clients locally and nationwide. Freshfield provides investment management and financial planning as a fee-only, fiduciary. To book a virtual or in-person complimentary consultation, please visit our Contact page.

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Data source: Kenneth R. French Data Library, Tuck School of Business, Dartmouth College