Seasonality
Seasonality in U.S. stock returns leads to the lowest percentage of positive returns in September. Since 1969, only 45% monthly returns in September were positive since 1969. Returns turn upwardly positive towards the end of the year following through with the commonly known “Santa Claus Rally”. However, seasonality is by no means a perfect forecasting tool as markets do not follow a script.
The first thing an investor can do is to diversify globally, because by doing so, your diversified portfolio becomes more resilient as evidenced by the seasonality chart below for a global portfolio of developed and emerging countries where percentage of positive months in September increases to 51% from 45% as compared to when it was only focused on U.S. stocks.
Secondly, should markets experience a decline, this can be a great opportunity for investors to put cash to work and pick up stocks at lower prices, adding to long term returns.
Most importantly, having a clear long-term plan and a robust investment philosophy helps investors stay seated and reap the rewards of long term growth of wealth. We wrote about how markets rise and fall, tumble and stall before invariably ripping higher, perfectly illustrated by a video that investment giant Vanguard created, shown above.
In the same way that you would rely on a doctor to treat you or a professional mechanic to service your automobile, investors can benefit greatly by working with an adviser — giving you the peace of mind knowing that your plan is in the hands of a professional.
If you would like to learn more about how to construct a resilient and robust investment portfolio that can last the generations, come speak with us, click here to schedule a exploratory chat with us. (Complimentary 30-minutes session)