Halloween: It’s the best time of the year to buy stocks

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I once got some excellent investment advice around Halloween from a fortuneteller in Salem, Massachusetts.

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“Are you ready to take more risks in your life?” When I flipped over some tarot cards, he asked on a table of magic crystals. “Do you have the information you need? Do you understand what you control, and what you don’t?”

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His advice was to avoid taking too much risk at that time – which turned out to be an excellent tactic, as the stock market fell immediately.

Whether the timing was lucky or not, I reflected at the time that they were generally very smart questions. And they only cost me $10, as opposed to the hefty fees you pay on the road of shame for serial underperformance.

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No wonder Warren Buffett says that stock market analysts say fortune tellers look good.

Meanwhile, Ghosts and Ghosts chase the stock market again this October. Halloween is often the scariest time of year for investors, who should look at the Dow Jones Industrial Average and ask themselves: Trick or treat?

So it’s worth revisiting this strange, scary, and inexplicably paranormal fact: Halloween is the best time of year to buy stocks. According to financial research, most or all of the long-term returns of the stock market have come during the winter months.

Professor Cheri Zhang of Nottingham University Business School in China and Ben Jacobsen of TIAS School for Business and Society in Europe Compiled all the stock market return data they could get from around the world, It wasn’t just the USA

“Our data includes all 114 stock markets containing the world’s stock market indexes for which price indices exist and in total we have approximately 63,000 monthly returns. The sample starts with the UK stock market in 1693 and begins in 2013. Wale ends with Rwanda’s stock market,” he wrote.

(odd note: 1693 it was time for the salem witch trials,

His conclusion? The stock markets overall outperformed cash in the winter months. But not in the summer months.

“In total, 62,962 monthly observations over 323 years show a strong Halloween effect,” Zhang and Jacobsen report. “The impact seems to be remarkably strong, with an average 4% higher returns during the November-April period compared to May-October.”

In 65 countries they had enough data showing not only the stock market monthly returns, but also the interest you could earn each month by holding your money in a deposit account or short-term bills. “Out of the 65 countries for which we have available total returns and short-term interest rates, except Mauritius, we cannot rule out a ‘sell in May’ effect based on our new test.” In other words, only in Mauritius it certainly made sense to keep your money in the market throughout the year.

This Halloween effect “defies economic gravity,” note Zhang and Jacobsen. It hasn’t disappeared or even turned upside down since it was widely written about 20 years ago.

This has been confirmed by others, such as Thomas Degenhardt and Benjamin Auer, professor of economics at the University of Leipzig, Germany. who duly reviewed all academic studies The Halloween effect further confirmed that the findings were “robust.”

Meanwhile, recent research has found, for example, that “quality” stocks outperform in the summer months and “junk” stocks in the winter: another way of saying that you have traditionally taken risks. Received the best award for from November to May.

And as I’ve pointed out here before, the summer months certainly seem like a time of instability.

If you were to sell the S&P 500 SPX,
+2.46%
-or an index fund that tracks it like the SPDR S&P 500 ETF SPY,
+2.38%
– On May 1st of this year you could buy it back for up to 13% less till the beginning of this month.

Why are the markets usually so shoddy during the summer? Or so cool during winter? No one seems to know.

I’ve always wondered whether investors are somehow haunted by the ghosts of 1929 (and, for that matter, 1987) during September and October.

But the scariest time of the year has traditionally been the best time to increase your investment in the stock market. Scary, but true.

Credit: www.marketwatch.com /

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