Investors can do themselves a huge favor by sitting out volatile market regimes

A common observation about investment is that "time in the market is more important than timing the market." That is, rather than obsessing about whether we're at the bottom and it's time to buy, or at the top and it's time to sell, it's generally a good idea for investors with a long run view to stay calm and not overreact to market movements.

In their contribution to Business Insider's quarterly list of the "Most Important Charts in the World," Josh Brown and Michael Batnick of Ritholtz Wealth Management point out an interesting twist on this concept: Avoiding the 25 best and worst days in the market over the last 30 years would have given you a slightly better return than just staying in the market over that entire period.

Brown and Batnick suggest that this indicates that investors might want to be cautious around highly volatile markets. They noted, "44 of these extreme days occurred when the S&P traded below the 200-day moving average. Missing the most volatile market regimes actually did you a big favor."

Here's their chart. The big thing here is that the purple line, representing an investor who skipped out on the extreme days, shows a higher return than the blue line, staying in the market over the entire time. Of course, missing the 25 best days on their own, represented by the red line, would have been a disaster, and missing just the 25 worst days would have led to superhuman returns:

Business Insider