So, you are going to learn how to buy stocks but you want to know if there is a best time to buy them. You might have heard of the Santa Clause rallies in December or that the market goes down every October. Not only would you like to know if there is a best month to buy stocks but maybe there is even a best time of the day to buy stocks too?
It is true that there are different times of the year when there is typically more or less activity in the market. For instance, in July and August more families are taking vacations than at any other time of the year. That means less people are paying close attention to the stock market and making investment decisions. Trading volume typically goes down for those months as does all activity on the Internet.
There are times when stock trading volume picks up and that is right after summer and following Christmas. In each of those cases, people go back to work in force and life returns to normal which means people are thinking about their jobs and investments. They have more time to pay attention to the news, surf the web, plan their futures and make stock buying and selling decisions.
You can see from the 10 year Dow Jones chart below though, that in the last 10 years there is really no pattern you can discern for what month or season of the year is better for stocks. 2001 and 2001 look similar with the Dow going down after summer but then going up sharply at the end of the year. But that pattern doesn’t hold for the other years.
In 2003 it was straight up almost the whole year and in 2004 and 2005 it was choppy all year with slight gains being made. 2006 was another good year with one major blip in the middle of the year and then 2007 was straight up until all hell broke loose during the second half.
2008 saw the market go down and keep going down all the way to March of 2009 when things reversed and went up for the rest of the year. Finally, 2010 has been choppy all year with no clear direction being chosen.
What you should take away from this is that rather than try to pick the best season to buy stocks or the best time of day to make your stock buys, you should be concentrating on finding the best stocks to buy right now. If you make good solid stock picks and are willing to hold them as long as the fundamentals remain good, you don’t have to worry about anything else.
Stock investing is a long term endeavor where you need to show patience and consistency. You don’t want to be jumping all over the place with different strategies on when to buy, when not to buy, and other things that are pretty much equivalent to market timing. Make your stock picks based on the fundamentals and any other personal information or opinions you might have. If you do that throughout your investing career, you won’t need to bother thinking about what time of the year it is and whether you should be buying or selling based on that.