Here’s question number five in the frequently asked investing questions series. As a bonus, we’ll answer one more question on Monday.
Question: I know that August, September and October are three of the worst months in the stock market. Does that mean we’re likely to stay in the dumps until the end of the year?
Answer: We’re not huge fans of seasonality. It’s true that, over time, the market has done most of its good work between November and April. But that’s just an average. Some years it does, some years it doesn’t.
Last October, for instance, wasn’t a bottom, it was a top! And September was one of the best months of the year. Similarly, in 2006, the market bottomed in mid-July and had a good August, September and October.
It’s good to have seasonality on your side, but it’s not nearly the be-all and end-all of your investment plan.
Please post any investing questions you have here and we’ll be happy to answer them.