Jan 26, 2012

The Best Times to Put Your Money into the Stock Market

I do not follow this. But I thought it is a good knowledge to have.

Stock investors, people who buy the market and other long-term investors would be interested to find out when is the best time enter the market. Knowing "the right time" will increase the probability of making money as well as the probability of making most money.

Conventional wisdom says to buy stocks during end September and early October period as historically, it is during this period that the market makes new lows within the year. The historical evidence for this is presented at Investopedia. There is also the pre-holiday rally where stocks tend to rally ahead of 3-day holidays in the United States. Then comes the January Effect, that also contributes to the Santa Claus Rally. For those looking for a quick buck, you may consider entering a day after Christmas. The Santa Claus Rally historically ends a few days after New Year's Day.

This article titled "Capitalizing on Seasonal Effects" also presents other useful and interesting market timing research such as:

  • Middle of a month is the best time to buy stocks

  • Monday is the best day in a week to buy stocks

With the US presidential election up and coming, there are also ways to capitalize on this market-moving event.
a potentially lucrative investment strategy would have included buying on October 1 of the second year of the presidential election term and selling out on December 31 of year four.
Well, the above is based on historical data and I see it as more of a guideline. Cycles do adjust themselves and some seasonal effects have been proven to be invalid these few years. For instance, this article from Fundsupermart.com dispels the famous "October Effect" and "January Effect".

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