We know that markets move in cycles, and that historically each bear market has been followed by a bull market. Therefore, if you remove your investment during a down market, you won't benefit when the market rebounds.
The chart below shows that investing $10,000 in the Australian sharemarket in February 1980 and pursuing a 'buy and hold' strategy resulted in the original investment being worth $318,148 on 31 January, 2010. The chart shows the effects on the investment of missing the best performing months – and the difference is quite substantial.
It shows that an investor who incorrectly attempted to time the market and missed the single best month over a 30-year period ended up with $270,926, almost 15% less than the investor who pursued the buy and hold strategy. Investors who sat on the sidelines and missed the best 10 months over the same period finished with just $96,058; that is, 70% less than the patient, 'buy and hold' investor's end value.