Why 54% Is All You Need to Be a Great Investor (or Tennis Champion)
A client emailed me recently after a rough week in the markets. She's a new DIY investor, still getting used to watching her portfolio in real time for the first time after years of never even logging into her old managed accounts.
“I've been checking the app almost daily – maybe not a good thing,” she wrote. “Would you say these recent losses are normal? I imagine we just keep plugging along as usual, but when might be a time to change what we are doing?”
It's such an honest question, and I appreciated her asking it. Because yes, checking daily is probably not a good thing, and yes, the losses are completely normal, and yes, you keep plugging along – and I want to explain why, because “just trust the process” isn't really a satisfying answer.
The odds are already in your favour
Some people think the stock market is a casino, and I understand why it feels that way when you're watching your balance swing up and down week to week. But the casino analogy actually makes the argument for staying invested, not against it, as long as you understand which side of the table you're on.
When you bet red or black at a roulette table, the house wins about 53% of the time – a tiny edge created by two green zero pockets that don't pay out. That's it. That small, persistent advantage is what funds every casino on the planet.
The stock market has its own version of this edge. Analysis of S&P 500 data going back to 1999 shows the market finished up on about 54% of trading days and down on 46%.
Crestmont Research has tracked the same figure over more than 50 years and arrives at 53.7%. That's barely better than a coin flip on any given day, but it's a real and consistent edge, and over decades it compounds into something extraordinary.
Why the days you miss matter so much
The temptation when markets get scary is to step aside and wait for things to settle down. The problem is that the best days and the worst days tend to cluster together, which means investors who sell during downturns frequently miss the recovery entirely.
Research from Hartford Funds found that missing just the 10 best trading days over a recent 30-year period would have cut your returns in half. Missing the 30 best days would have reduced your returns by 84%.
And, get this: 76% of the market's best days occurred either during a bear market or in the first two months of a new bull market, which is precisely when most people have already bailed.
A Vanguard analysis put some real numbers on this. A $100,000 investment in a 60/40 portfolio held for nearly 30 years grew to $865,000 if you stayed fully invested the whole time. Miss just the five best days over that entire period and you end up with $659,000. Miss ten days and it drops to $540,000. Ten days out of thirty years, and the difference is your retirement.
The Roger Federer parallel
When I think about what it actually feels like to stay the course through bad markets, I keep coming back to something Roger Federer said at his 2024 commencement address at Dartmouth College.
He asked the graduating class: over his career, he won almost 80% of his 1,526 singles matches. What percentage of individual points did he win?
The crowd guessed high. The answer was 54%.
As Federer put it:
“In other words, even top-ranked tennis players win barely more than half the points they play.”
Think about what that means. One of the most dominant athletes in the history of his sport was losing nearly every other point, for 24 years straight.
The secret wasn't that he stopped losing points. It was that he learned not to dwell on them.
In his words, when you lose nearly every second point on average, you learn not to carry it with you. A double fault is just a point. Getting passed at the net is just a point. You reset, and you play the next one.
The stock market is only up 54% of trading days. Roger Federer won only 54% of his points. But in both cases, that tiny edge applied over a long enough time horizon produces extraordinary results.
So back to my client's question
Are the recent losses normal? Yes, completely. Nearly half of all trading days end in the red, and that's true in good years and bad ones. The losses are the price of admission for capturing the gains.
When might be a time to change what you're doing? If your financial situation changes substantially – a job loss, a major expense, retirement approaching sooner than expected – then it might be worth revisiting your asset mix. But “the market is down and it's uncomfortable to watch” is not a reason to change anything. That's just the roulette wheel landing on red a few times in a row.
The house doesn't change its strategy after a losing streak. It understands that the edge is real and that it will show up over time.
As a long-term, diversified investor, that edge belongs to you too. As long as you don't get spooked by a couple of down days or weeks.
