I've heard that it's basically a waste of time to invest in the stock market from April to November. True?

Question

I wish I could remember the source, but basically, analysis was done on a set amount ($1000) over 20 years. The $1000 invested between November and April (winter/spring) showed steady growth over the years, but money invested from April-November (summer/autumn) showed almost no growth at all. Is this hogwash? Or is there some validity to it? If valid, where should one invest money from April to November (summer/autumn)?

Answer 1

i do not think that is consistent with the efficient market theory. if everyone knew about this seasonality in the stock market, then there would not be any abnormal returns earned over that period consistently. but if you ask me, there are really some years where investing from april to november experiences a dip in value, while november to april investments increase. this can be attributed to year-end window dressing. this is where portfolio managers try to push up prices so that their fund will have a higher value by the end of the year.

Answer 2

There is a saying in the stock market that goes like this: Sell in May and go away.

That's because from May-October is when stocks perform the worst. It doesn't mean you can't make money, it's just that during those 6 months, returns are minimal. Think about it, the worst market crashes (except Sept. 17, 2001 when the market reopened after the attacks and lost 682 points in 1 day) happened in October. Market crash of 1929, 1987 and 1998.

As a matter of fact, if the market does not continue it's sell off soon, the chance for a "crash" this October increases greatly. What I mean is this: In May 2006, the market was within 75 points of it's all time high. During a bear cycle, historically, the market has never exceeded it's highest price from the previous bull cycle. That was 1 clue that the market should sell of. Second is the high in May was reached in May and thus "Sell In May and Go away" became apparent. Add to that the fact that 2006 is the year of the 4 year cycle low.

The indicators were telling me that the market should sell off, which it did, but as of the end of trading Friday, the market was only off 450 points from it's May high. In the whole scheme of things, that's not a lot. What the market should be doing is going through a fairly steady, painful blood-letting, but it's not. The longer the market doesn't go though it's sell off phase, the greater the chance of a "crash". The market should bottom in October, but with the minor sell off (in point value) we seen since May 10th, the market is not moving into a cycle low.

If the market continues to maintain it's levels or not go through a large, steady sell-off, there is a good chance we'll see a 1 day sell off in excess of 500 points. If the market doesn't move in a sell off through the remainder of the summer and early fall, I think we'll see a "crash" sometime after October 10th of at least 500 points in 1 day, but more along the lines of 600-700 points in a single day - maybe more.

Only time will tell, we just have to wait and see.

I know, I'm going to get a lot of flame mail telling me that I'm moron.

Answer 3

right, just lay in your bed and wait it out

If you base something on a false premise (like most TV these days), anything can be true, and anything can happen.

There are two sides to every market. Learn how to short it. Sell the weak ETF sectors and buy the strong ones. There's always opportunity. Switch to currencies or gold or oil or orange juice or eggs.

Answer 4

Yes, you got it right. And you know who discover it?

check this book out Trader Almanac by jeff Hirsch

Jeff Hirsch and his father study it. Basically he breaks down like this
may-Oct==have negative return,attention now, Stock market had tendency crash in Oct and september.
November-April==>>dow,sp500,na... return average 8%.

You must read his book Trader Almanac by jeff hirsch
It's valid and you park your money in money market account or healthcare or consumer staple fund or utility fund

I accumulate in good amount in 401k at the young age.I could share with you. when consider invest in stock market. you should consider basic 3 things:

fundamental analysis==(economic data,finincial health, management, business model, competetion)>>what to buy

technical analysis==(chart+indicator)>> when to buy

Sentiment/schycho analysis==>>mood of investor, Contrarian point of view.
Market cycle===>> check out book Trader Almanac by jeff hirsch will give you inside stuff
When you combine 3 thing, It is one of the powerful knowledge goinh with you for the rest of your live

At the age of 32. my 401k is amassed 71,000.00 and 30000.00 in taxble account. by follow simple rule

Answer 5

If you look at a single market index, that may be true. If you have a good manager handle your account, its complete hogwash.

Answer 6

It depends on if this is a long term or short term investment. If it's long term you wouldn't pull it for a few months and then put it back.

Answer 7

It aint valid so don't worry about it.