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Seasonality
Brian
Trumbore
President/Editor, StocksandNews.com
Our Annual Review
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 2004, your portfolio after 54
years would have actually shrunk $502 to $9,498. [Not
including dividends.]
But,
if you took $10,000 and invested it only during November
1 - April 30, your portfolio would have grown $499,933.
*For
the S&P 500 the results are $357,785 and $7,461.
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 2005
November?..1.7%
avg. percentage change
December?..1.8%
January??..1.3%
February??0.2%
March???0.9%
April???..1.8%
May????0.1%
June??......-0.1%
July????1.0%
August??..-0.1%
September....-1.1%
October?......0.6%
Returns
for the S&P 500?January 1950 - June 2005
November.....1.7%
December?.1.7%
January??.1.4%
February?..-0.0% [-0.02]
March??...1.0%
April???.1.3%
May???..0.3%
June???..0.2%
July???...0.8%
August??..0.0% [0.02]
September...-0.7%
October?.....0.9%
Nasdaq?January
1971 - June 2005
November?..2.1%
December?...2.1%
January??...3.7%
February??.0.6%
March???.0.3%
April???...1.1%
May????1.2%
June????1.2%
July???...-0.4%
August???0.2%
September?.-1.0%
October??..0.6%
Source:
"Stock Trader's Almanac 2006"
Brian
Trumbore
Wall
Street History will return next week.
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