Is NOW the best time to invest? Buying shares in November and selling in April has doubled your money over the past 20 years
By Eleanor Lawrie For Thisismoney.co.uk
- Investing from November 1 to April 30 annually for past two decades would have made you a 216% return, according to claims
- That's compared to a 100% return if you stayed invested all year round
- If you had invested only in the summer you would have LOST money
Can investing with the seasons make a difference to your returns?
Experts often talk about the cyclical nature of markets and try to identify the beginnings of bear and bull periods. But could the reality be much simpler?
Analysis suggests that investors who buy shares at the start of November and sell at the end of April are significantly more successful than those who only invest in the warmer months.
Winter of content? Data suggests November to April investments do better
In fact, winter investors would have see a rise of 216 per cent over the past 20 years had they bought and sold every November and April, while summer investors would have lost 31 per cent.
That's a difference of turning £100 into £216 compared to seeing it dwindle to just £69.
Investing during the colder half of the year made investors more money than those who invested for a whole year. Those investors saw a 100 per cent rise to £200 for every £100 invested, excluding dividends.
Investing continually over the 10 years, the difference in returns is still marked. Investing throughout the whole time period would transform your £100 into £130. That's compared to £166 if you opted for winter investing, and £85 if you invested during the summer months.
Stephen Eckett is author of The UK Stock Market Almanac, from which the data was sourced.
He said: 'The Winter Portfolio leverages off two phenomena. The first is the feature of shares generally performing better over the winter (November to April) than over the summer (May to October). The second is the identification of certain shares that consistently out-perform the market in the winter period. These two features together can be used to create a turbo-charged portfolio.'
Rebecca O?Keeffe head of investment at Interactive Investor, which compiled the research, said: 'Year after year, the data suggests investing over the winter months is far more favourable than investing over the summer, or, indeed, remaining fully-invested all year round.
'Between November and April, stocks are less volatile, sentiment is more positive, the weight of liquidity is strong and hence the performance versus the rest of the year is unmatched, either in risk-adjusted or absolute terms.'
Save the date: Does selling in April boost returns?
Save the date: Does selling in April boost returns?
'There are no conclusive studies on this subject, but one explanation is that far more money flows into the market over the winter months as investors take advantage of tax-efficient products in the run up to global tax year ends. This liquidity provides a strong foundation for global equity markets.'
The fund supermarket is so convinced the phenomenon is genuine that last year it created two winter portfolios - 'Aggressive' and 'Cautious'.
They contain 'high-beta stocks' that typically perform even better over the winter months than the market average
The former returned 16.9 per cent, and the latter 14 per cent, both beating the 8.7 per cent rise of the FTSE 350 index.
Danny Cox of rival fund broker Hargreaves Lansdown said that while there was something to seasonal investment, it worked better in theory than in practice.
'Studies show that if you invest now until April, stocks do well because they typically have not done well in October. You will also have Isa money in the final months of the tax year coming in which can give a boost to markets that way.
'What people should not try to do is invest for six months, come out then go back in again for six months. The statistics may say you will do better but It's hard to time right and it's much better to to take a long term view - you are much more likely to get a better return over five years.'
