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Seasonality
Brian
Trumbore
President/Editor, StocksandNews.com
Back in 1986, Yale Hirsch, now Editor
at Large of "Stock Trader's Almanac," discovered one
of the most powerful principles of investing, that
being if you invest only during the November 1 - April
30 time period you will have far more success than
investing in the corresponding period, May 1 - October
31. And it's not even close.
For
example:
If
you invested $10,000 in the Dow Jones Industrial Average
on May 1, 1950 and took it out each October 31, repeating
this exercise through 2003, your portfolio after 54
years would have actually shrunk $318 to $9,682. [Not
including dividends.]
But,
if you took $10,000 and invested it only during November
1 - April 30, your portfolio would have grown $482,060.
*For
the S&P 500 the results are $349,165 and $7,102.
The
key is the power of compounding, as well as the fact
that the four top months since 1950 for both the Dow
and the S&P are November, December, January, and April,
all within the 11/1- 4/30 timeframe. [For the S&P
it's five months, including March.]
Monthly
returns for the Dow Jones?January 1950 - June 2004
November?..1.6%
avg. percentage change
December?..1.8%
January??..1.4%
February??0.2%
March???1.0%
April???..1.9%
May????0.1%
June??......-0.1%
July????1.1%
August??..-0.1%
September....-1.1%
October?.....0.6%
Returns
for the S&P 500?January 1950 - June 2004
November.....1.7%
December?.1.7%
January??.1.5%
February?..-0.1%
March??...1.0%
April???.1.3%
May???..0.3%
June???..0.2%
July???...0.9%
August??..0.02%
September...-0.7%
October?....0.9%
Nasdaq?January
1971 - June 2004
November?..1.9%
December?...2.1%
January??...3.9%
February??.0.6%
March???.0.3%
April???...1.2%
May????1.0%
June????1.3%
July???...-0.2%
August???0.3%
September?.-1.1%
October??..0.5%
Source:
"Stock Trader's Almanac 2005"
Brian
Trumbore
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