JP Morgan publishes a study every year on market participation. The 2023 edition contains a chart that regularly does the rounds on finance Twitter, partly because the conclusion is counter-intuitive and partly because the maths is unkind.
The S&P 500 returned about 9.8% per year on average between 2003 and 2022. If you missed the 10 best trading days over that 20-year period, your return drops to 5.6%. Miss the 20 best days and you’re at 2.9%. Miss the 30 best and you’re at 0.4%. By the 40th day you’re losing money in nominal terms.
Ten days. Out of around 5,000 trading days. About 0.2% of all trading days in the period.
The natural reaction is to assume the best days are spread evenly across the period. They aren’t. Most of them cluster near the worst days. The 2008 crash and the 2009 recovery. The March 2020 COVID crash and the April-July 2020 rebound. The pattern repeats every cycle: panic, capitulation, and then a snap-back so violent it usually happens before the news cycle catches up.
The people who miss the best days are, almost without exception, the people who sold during the worst days.
The thirty-year chart
Zoom out far enough and the lesson sharpens.
If you’d put £10,000 into the S&P 500 in January 1990 and never touched it, you’d likely have well over £200,000 today. (Approximately. Depending on exchange rates, dividend reinvestment policy, and which precise endpoint you pick.) That return came through the dot-com crash, 9/11, the 2008 financial crisis, COVID, the 2022 inflation drawdown, ten UK prime ministers, six US presidents, and roughly 8,000 daily reasons to sell.
The boring version of the argument is that markets go up over the long term. The sharper version is that the long term contains many short terms where they emphatically do not, and the only way to get the long-term return is to live through the short terms without flinching.
This isn’t specifically a sales pitch for stocks. It’s a description of how compound returns work when you stop interfering with them.
How compound interest actually behaves
The standard textbook example uses a stylised number: £1,000 at 7% for 30 years becomes £7,612, that sort of thing. The number is correct, but the chart it produces is misleadingly smooth.
Real compound growth from regular contributions looks more like this:
The shape isn’t a smooth curve. It’s a series of flat stretches and sudden accelerations, with most of the growth happening in the last third of the timeline. The reason is that compounding works on the cumulative pile, and the pile only gets meaningful late.
Year 5 of a £500/month investment plan at a 7% return: about £36,000 in the pot, of which around £6,000 is growth. Year 10: £87,000, with £27,000 of growth. Year 20: £260,000, with £140,000 of growth. Year 30: £610,000, with £430,000 of growth.
The acceleration is the whole point.
What this means in practice: the early years feel slow because they are slow. Your contributions are doing more work than your returns. Somewhere around year 18 the balance flips, and returns start doing more work than your contributions. By year 25, the contributions are almost decorative compared to the compounding pile.
This is the part nobody tells you when you start. You’ll feel like you’re getting nowhere for the first decade. Then suddenly it looks like you’ve always been getting somewhere.
A short personal aside
I built a wealth tracker. It’s called VaultKeep. So I’m not pretending to be a neutral observer of “you should be tracking this”.
I built it because I’d been investing for about seven years before I realised I had no idea what my actual long-term return was. I had statements from three brokers, an ISA, a SIPP, some crypto, a property, and a hand-maintained spreadsheet that lost data the one time it crashed. The signal I most needed (am I actually compounding?) was buried under operational noise from the tracking itself.
The product solves that for me. The deeper point is that compound returns are real even when you can’t see them, and tracking the right horizon is harder than it sounds. The rest of this post still holds whether you ever touch VaultKeep.
Four questions to ask yourself
Not a checklist, more a five-minute audit. If you’ve been investing for any meaningful period:
What is your actual long-term return? Not your last quarter, not last year. Your annualised return since you started. If you can’t answer in 30 seconds, that’s a tracking problem.
What’s the worst drawdown you’ve held through without selling? The answer tells you about your real risk tolerance, not the one you put on a broker questionnaire when you opened the account.
How much of your wealth is in the kind of asset that compounds (equities, real estate, private business) versus the kind that doesn’t (cash, short-dated bonds at current yields)? The answer is a function of your horizon, not your personality.
If the market dropped 30% tomorrow, do you have a written rule for what you’d do? Not a feeling. A written rule. The presence or absence of that rule tells you more about your future return than any allocation decision.
You don’t have to do anything with these answers today. But once you’ve answered them, you’ve answered them, and the next 30% drop becomes a known scenario rather than a novel emergency.
One last thing
There’s a temptation, in posts like this one, to end with “the market always goes up, stay the course, soldier on”. It’s a fine message but it skips the harder truth: staying the course requires evidence, and evidence requires tracking, and most people aren’t tracking the thing that would help them stay the course. They’re tracking last week’s wobble.
If you want the long-term return, you have to be able to see the long term. That’s the part nobody can do for you. The tools can help: a chart that goes back 30 years rather than 30 days, a projection that looks 30 years forward rather than 30 days forward, a net-worth-over-time line that holds steady through the noise. But the seeing is up to you.
Sit still. Watch the curve emerge. Most of the work isn’t in the doing. It’s in the not doing.