The best time to invest in stocks is from November to April, according to the Stock Traders Almanac for 2009. In fact, say authors Jeffrey and Yale Hirsch, most of the long-term gains in stocks occur in these six months.
Say an investor put $10,000 into the stocks of the Dow Jones Industrial Average (DJIA) during the six months to April 30, 1950. Then they rolled the proceeds successively into the same six months every year to 2008. The $10,000 would have gained $531,444. If they did the same thing from May 1 to Oct. 30, the $10,000 would have gained a mere $1,021.
Even more astounding, says the Almanac, is that one can triple the return on the best six months to $1,546,114 by tweaking entry/exits points. Instead of using the first/last day of the six-month period to buy/sell, one can use a simple Moving Average Convergence Divergence(MACD) indicator. In upward trending markets, the MACD gets the investor in earlier and longer; in downward markets, it gets them in later and out sooner.
Also, it appears the Almanac analysis did not use total-return indexes (which include dividends). If they did, the gains would be even larger! On a side note, one wonders if the annual returns would be sensitive to the starting year, and how the results would have been affected if the investor averaged in a position over several years.
I did a quick search for academic studies on this seasonal pattern but came up with little. Anybody know of any? But I do know there has been academic research into market anomalies in general and much of it warns investors to be wary of investing on the basis of historical patterns because of the Efficient Market Theorem (EMT).
As awareness of the repeating profit opportunity spreads, goes the EMT, it is discounted by investors seeking to capture the profits. If one is coming in at the late stages of the discounting process, theyll end up taking a random walk. The Almanac, an annual publication, has been expounding the best six months strategy since the mid-1980s. More details on the lags etc. in the EMT are in this July 17, 2007 post.
Blogs & Comment
Best time to invest
By Larry MacDonald
The best time to invest in stocks is from November to April, according to the Stock Traders Almanac for 2009. In fact, say authors Jeffrey and Yale Hirsch, most of the long-term gains in stocks occur in these six months.
Say an investor put $10,000 into the stocks of the Dow Jones Industrial Average (DJIA) during the six months to April 30, 1950. Then they rolled the proceeds successively into the same six months every year to 2008. The $10,000 would have gained $531,444. If they did the same thing from May 1 to Oct. 30, the $10,000 would have gained a mere $1,021.
Even more astounding, says the Almanac, is that one can triple the return on the best six months to $1,546,114 by tweaking entry/exits points. Instead of using the first/last day of the six-month period to buy/sell, one can use a simple Moving Average Convergence Divergence(MACD) indicator. In upward trending markets, the MACD gets the investor in earlier and longer; in downward markets, it gets them in later and out sooner.
Also, it appears the Almanac analysis did not use total-return indexes (which include dividends). If they did, the gains would be even larger! On a side note, one wonders if the annual returns would be sensitive to the starting year, and how the results would have been affected if the investor averaged in a position over several years.
I did a quick search for academic studies on this seasonal pattern but came up with little. Anybody know of any? But I do know there has been academic research into market anomalies in general and much of it warns investors to be wary of investing on the basis of historical patterns because of the Efficient Market Theorem (EMT).
As awareness of the repeating profit opportunity spreads, goes the EMT, it is discounted by investors seeking to capture the profits. If one is coming in at the late stages of the discounting process, theyll end up taking a random walk. The Almanac, an annual publication, has been expounding the best six months strategy since the mid-1980s. More details on the lags etc. in the EMT are in this July 17, 2007 post.