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Wall Street History
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11/04/2005
Seasonality
Our Annual Review
Back in 1986, Yale Hirsch, now Editor at Large of “Stock
Trader’s Almanac,” discovered one of the most powerful
principles of investing, that being if you invest only during the
November 1 – April 30 time period you will have far more
success than investing in the corresponding period, May 1 –
October 31. And it’s not even close.
For example:
If you invested $10,000 in the Dow Jones Industrial Average on
May 1, 1950 and took it out each October 31, repeating this
exercise through 2004, your portfolio after 54 years would have
actually shrunk $502 to $9,498. [Not including dividends.]
But, if you took $10,000 and invested it only during November 1
– April 30, your portfolio would have grown $499,933.
*For the S&P 500 the results are $357,785 and $7,461.
The key is the power of compounding, as well as the fact that the
four top months since 1950 for both the Dow and the S&P are
November, December, January, and April, all within the 11/1-
4/30 timeframe. [For the S&P it’s five months, including
March.]
Monthly returns for the Dow Jones January 1950 – June 2005
November ..1.7% avg. percentage change
December ..1.8%
January ..1.3%
February 0.2%
March 0.9%
April ..1.8%
May 0.1%
June ......-0.1%
July 1.0%
August ..-0.1%
September....-1.1%
October ......0.6%
Returns for the S&P 500 January 1950 – June 2005
November.....1.7%
December .1.7%
January .1.4%
February ..-0.0% [-0.02]
March ...1.0%
April .1.3%
May ..0.3%
June ..0.2%
July ...0.8%
August ..0.0% [0.02]
September...-0.7%
October .....0.9%
Nasdaq January 1971 – June 2005
November ..2.1%
December ...2.1%
January ...3.7%
February .0.6%
March .0.3%
April ...1.1%
May 1.2%
June 1.2%
July ...-0.4%
August 0.2%
September .-1.0%
October ..0.6%
Source: “Stock Trader’s Almanac 2006”
Brian Trumbore
Wall Street History will return next week.
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