Tuesday, 19 December 2017

Why December Is Best Month to Be an Equity Investor

April and December are the best months to be an equity investor as, during these months, the FTSE 100recorded the highest average monthly returns between 1980 and 2016, according to a study. Since 2000, October has overtaken December as the second best-performing month in global market.

The months with the lowest - in fact, negative - returns are May, June, and September. Since 2000, January has equaled September in having the worst average returns. Meanwhile, in a 2013-published analysis, it was found that monthly returns from stock markets in 70 countries are signi­ficantly higher in January, February, April, July, and December relative to the other months of the year. September is again the worst month to be invested.
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Investors no longer abandon the City for the summer, but an analysis of returns over the past 30 years shows that there is typically fall in the market in between May and September. Since 1986 the FTSE 100 index, excluding dividends and charges, has ended down more than half of the time between 1 May and 30 September. Taking the period as a whole, the index has lost 29.7% over the five summer months - an average of 0.99% per year - but has made 194.3% during the seven winter months. The FTSE All-Share index reflects a similar picture: it fell 31.8%, an annual average loss of 1.1%, during the summer, but rose 211.4% during the winter.

According to the technical analysts, even though stock markets are meant to be efficient, this sort of seasonal behavior still exists.

The stock market seems to be the following trend this year, having performed well over the winter months. This means that markets might take a breather over the summer, as they have been pricing in a more optimistic outlook.

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