According to the seasonal performance of the markets, it seems we cannot afford not to invest in the markets for the last 3 months, especially November.
Here is the average 1-month per cent change in the Dow Jones Industrial Average from 1880 to 2012:
From this chart, it seems we have to stay invested from October to the end of January.
I was in the mood, so I dug up the performance of S&P 500, MSCI World and MSCI Emerging Markets in these 4 months from 1999 to 2020:
There are 22 periods during this analysis. The majority of this four-month period (1st Oct to 30th Jan) is positive.
There were more negative occurrences for MSCI World and Emerging markets compared to S&P 500.
Average returns have been positive, with Emerging markets having higher returns.
However, this period is not foolproof. I think most four-month periods were rather livable except for the four-month during 2007 and 2008. That is some nasty drawdown.
I was surprised that only one out of 1999 to 2002 was negative during October to January. I would have expected more since this is one of the more shitty bear markets in recent memory (by virtue of how big of a psychological grind it was)
If we only count the last 5 years, the lowest cumulative returns are about 6.6% to 6.7% for the S&P 500 and MSCI World.
Since I am on a roll here, why not take a look at the performance of “buy-in October and sell before May”?
So I tabulated the data from 1999 to 2020 below:
There are 22 periods. 81.8% of those periods are positive.
2000, 2007 and 2008 were periods where this strategy didn’t work so well. Or rather, this strategy does not completely eliminate downsides.
The average return is very respectable.
What is amazing is that the return at the 25th percentile was not very high, but still positive.
If there is a conclusion to be made, it is that quantitatively, missing out on returns by not being invested during these two periods are going to hurt returns if you hold a strategic long-term portfolio.
Sign up with the new SG broker Futu SG today before the 2nd of October and you can receive one FREE Apple share and 3 months of Commission-free trading. All you have to do is open the account and deposit SG$2700 into the account and you can get this welcome package estimated to be worth SG$205!
Here are the easy steps that allow you to qualify in a short time.
Join the Investment Moats Telegram channel here. I will share the materials, research, investment data, deals that I come across that enable me to run Investment Moats.
Do Like Me on Facebook. I share some tidbits that are not on the blog post there often. You can also choose to subscribe to my content via the email below.
I break down my resources according to these topics:
- Building Your Wealth Foundation – If you know and apply these simple financial concepts, your long term wealth should be pretty well managed. Find out what they are
- Active Investing – For active stock investors. My deeper thoughts from my stock investing experience
- Learning about REITs – My Free “Course” on REIT Investing for Beginners and Seasoned Investors
- Dividend Stock Tracker – Track all the common 4-10% yielding dividend stocks in SG
- Free Stock Portfolio Tracking Google Sheets that many love
- Retirement Planning, Financial Independence and Spending down money – My deep dive into how much you need to achieve these, and the different ways you can be financially free
- Providend – Where I currently work doing research. Fee-Only Advisory. No Commissions. Financial Independence Advisers and Retirement Specialists. No charge for the first meeting to understand how it works
- Create A Fund to Pay Your Future Health Insurance Premiums – How much do you need? - October 17, 2021
- DBS’s Take on Property as an Investment Strategy for Singaporeans Going Forward - October 14, 2021
- Moat Market Intel: St Joe, Spotify, Atlassian and Cloudflare. Also Very Negative Investor Sentiment. - October 13, 2021