SHOULD YOU BUY OR SELL STOCKS AT THE END OF THE YEAR?
2010 is almost over and now is the time that people make year end stock buying and selling decisions for their portfolio. Are there any specific reasons why people sell or buy stocks during the last weeks of a year?
Reasons For Buying Stocks
1) Mutual fund managers have to report their holdings and sometimes they buy stocks at the very end of the year to make their list of stocks look better. In other words, they buy a stock at year end just for show to make it look like they have owned it. This is usually a hot stock that is very popular that has done well throughout the year. They want to make it look like they didn’t miss out and have had it in the fund.
2) The Santa Claus rally is the period right after Christmas through the first week in January. You might have thought that is was the period running up to Christmas but it is really the couple of weeks after Christmas is over. It is during this 2+ week period that stocks often go up. This has been attributed to several things including the speculation that people are happy and in a buying mood to the thinking that people get money for Christmas and decide to buy stock with it. There is nothing “official” about the Santa Claus rally and many years it never materializes but some people buy stocks right before this time period hoping they will go up and then they can sell them for a quick profit.
Reasons For Selling Stocks
1) The most common reason to sell stock at the end of the year is for tax purposes. It is then that you can make the final decision whether you want to report a capital gain or a loss and sell your winners or losers accordingly. If you had stock losses carried over from the previous year you will want to remember them and take them into consideration.
2) Some people just like to clean out their portfolios at the end of the year so they can get a fresh perspective going forward. We all have a stock or two that has been sitting there for a while doing nothing and selling it opens up money that can be spent next year on a stock that will hopefully do better.
