Is there a “best time” to buy or sell stocks? Should you wait for a specific month or day of the week before you make your move? Is any of this even worth considering, or are it just buzzwords and urban legends?
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Hello everyone, and welcome back to investing with Antoaneta. In this blog, we’ll talk about timing your investments. Can it be done? Is there anything to be gained from keeping track of the patterns, and should you bother doing it? Is there really a “best time” to buy or sell?
There are a lot of new people coming to the Stock Market. And they need information. They need to learn how things work. So, they go online and read articles and watch videos. Then, they see titles like “the best time to do X”, and they eat it right up. I’ve had people ask me questions of this sort many times. Things like “Toni, when is the best time to sell?” or “Should I wait until this or that month to buy?” and so on. Check out my other blogs such as, “Bill Gates Portfolio Changes – Why Is He Selling? What Stocks He Is Buying?” and my virtual masterclass for Wellness Business Idea.
Now, if you spend some time observing market trends (and especially if you take a look at the historical data), you will notice that there really are a few repeating patterns. Things that happen if not every year, then at least once every couple of years.
When is the best time to buy or sell?
Before we jump to the specific patterns, I want to take a moment to talk about how I approach the Stock Market. And don’t worry – it will start making sense very soon.
I manage my budget very carefully, and I make sure to always have some cash on hand. So, if I had, let’s say, £10 000, I would set aside at least 20% for investing. However, I wouldn’t put the entire sum into the market at once. I would wait for a good opportunity (when my stocks are undervalued), and I would gradually add to my positions. And, yes, the stocks could go up in price, and I could “miss out” on adding as much as my budget could technically support, but I’m not worried by this fact because some other stock might drop even more. A better deal might come up. Or, even that same stock that I was adding could also keep dropping. You just never know for sure until it happens.
This strategy provides me with safety, stability, and confidence. I am confident that if something comes up, I won’t be stuck in a situation where I can’t take advantage of it. Potentially missing out on a couple of shares every now and then is very much worth the trade-off.
Because, here’s the punchline:
Long-term investing is a … Long-term process. Shocking, I know.
But that’s exactly my point. You are not in this just to make a quick buck and get out. You are here to grow your wealth, year after year. So, if you have a tight budget to work with at first, that’s fine. There is no rush. You need to be calm, patient, and disciplined. Just take your time and work your way up. Don’t ever give in to the hype or the fear of missing out. There will always be more opportunities.
Now, let’s have a look at some patterns, and you will see how this approach helps me benefit.
Best and worst days of the week
Monday is known as “the worst day to sell stocks”. And, yes, stocks can be somewhat cheaper on Monday than during the rest of the week. But why is that?
Well, because bad news usually comes out during the weekend. Companies prefer to release bad news on Saturday and Sunday in the hopes that fewer people would notice since everyone is “busy” resting and relaxing. Then, the media comes along and starts competing over who gets to break the news first, and the market ends up opening in the red on Monday.
Obviously, this makes Monday a good day to buy stocks … as long as the price is right, of course.
At the start of the year, the Stock Market usually wants to go up.
There are two reasons for this: new year’s resolutions and taxes.
And yes, I know it sounds silly, but if you’ve ever read positive financial-entrepreneurial blogs, you know exactly what I’m talking about here.
“Start investing” and “focus on long-term wealth-building” are two of the most popular and overused financial tips, mostly because, well, investing is an excellent way to build wealth. And, if you’ve been following my channel for at least a couple of months, then you know that I’m also not above this practice… Guilty as charged.
Now, as far as taxes go, well, let’s be honest here – nobody likes paying more taxes than they absolutely have to. So, many investors get into the habit of selling out of their weakest performing positions to write off some of their taxable income. Then, this money goes right back into the stock market.
So, looking at some of the stats, we can see that for the 91 years between 1928 and 2018, this happened 56 times or 62% of the time.
Reasonable to expect but don’t bet on it.
The market is weaker during the summer, and the returns are lower.
A lot of investors pull out of their positions when they go on vacation during the summer. Then, they jump right back into things before the end of November, in anticipation of December. More about what happens in December in a few moments.
Between 1950 and 2013, the stock market demonstrated:
- 0.3% average return for the May-October period
- 7.5% average return for the November-April period
A lot of investors believe that October is a “bad” month because some of the worst financial crashes in history happened in October. And I’m talking about major problems here, like the bank run back in 1907 and the crashes of 1929 and 1987.
In reality, the market triggers usually happen in September or even earlier, but we only start feeling the results in October.
Additionally, October is also the month that ended some of the biggest bear markets in 1987, 1990, and 2001.
Decembers usually start slow, but the market quickly picks up before the end of the year. Generally, this is said to affect the last five days of December, along with the first two days of the new year.
December is when people get their holiday bonuses. So, everyone has a bit more money to work with. Now, some people are going to use this money to buy gifts and nice stuff for themselves and their loved ones. Other people are going to try and use this money to make more money.
When people buy more stuff, the companies make more money, and the Stock Market goes up.
When people use their bonuses to invest (more often than not in anticipation of the January effect), the Stock Market goes up.
Between 1950 and 2019, this happened 77.9% of the time, with a 1.33% average rate of return over the seven trading days.
The best time to invest will always vary from individual stock to individual stock. But, if you are patient, disciplined, and have your budget in check, you can definitely benefit from these patterns.
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Thank you all for watching, and until next time!
Recommended for further reading:
- The Five Rules Successful Stock Investing: Morningstar’s Guide to Building Wealth and Winning in the Market
- A Beginner’s Guide to the Stock Market: Everything You Need to Start Making Money Today
- Shares Made Simple: A beginner’s guide to the stock market
- How to Make Money in Stocks: A Winning System In Good Times And Bad
- The Financial Times Guide to Investing: The Definitive Companion to Investment and the Financial Markets: The Definitive Companion to Investment and the Financial Markets