The good folks at Bespoke tracked the percentage of the market's gains (or losses) that came overnight versus the regular trading day. To do this, every day they recorded the percentage change in the S&P 500 tracking ETF (SPY) from the prior close to the open and then from the open to close.
The difference in the cumulative gains of each investing strategy (buy and hold, overnight and day trading) was staggering. See the chart, courtesy of Bespoke, below:
A simple buy-and-hold strategy over the course the last year through June 21 resulted in a 16.2 percent gain, Bespoke reckons. (See the blue line.) When the analysts broke out those returns based on overnight trading (green line) and day trading (red line), both of those strategies resulted in a mere 7.8 percent gain. In other words, the twitchy traders lagged the buy-and-hold investors by more than eight percentage points.
True, all three strategies had their ups and downs over the course of the year, but ultimately buy and hold prevailed, Bespoke notes:
Back in March, when the S&P 500 saw its first pullback of 6 percent this year, there was a wide divergence between overnight and intraday [day trading] returns (overnight was weak, while intraday was strong). In the current pullback, however, the losses have been more evenly split, although declines during the trading day have been modestly outpacing the losses during overnight trading.There's yet another win for the buy-and-hold camp that Bespoke did not factor into this analysis. The day traders and overnight speculators churned up lots and lots of trading fees, which further eroded their returns. Those 7.8 percent gains on the above chart are really just notional. The buy-and-holders, meanwhile, easily outperformed both groups -- and hardly gave their brokers an extra dime.