Q. I save every month and invest in a mutual fund. But I’ve heard certain months of the year are better or worse for the stock market. Should I take that into account before I invest? I mean stuff like the January Effect — what are the other times?
— Trying to learn
A. There are many theories, but the question you need to ask is what kind of investor you are.
Most theories about when to jump in or out are for market timers and short-term investors. Most individuals are long-term investors.
And if you’re a prudent, long-term investor, these theories can be ignored, said Ronald Garutti, a certified financial planner with Newroads Financial Group in Clinton.
“I am not a market timer not do I personally invest that way,” Garutti said. “Being a long-term investor does not mean that you don’t make occasional trades, but it does mean that if you bought on a Tuesday when the sun was in perfect alignment with Jupiter — if that actually ever happens — it probably won’t alter your long-term return all that much.”
He said the shorter time period that you invest, the more timing comes into play.
Garutti did a quick Google search to see what market timing theories came up:
1. Buying stocks on the first day of the month.
2. Buying stocks depending on which team wins the Super Bowl.
3. Buying stocks depending on which party wins the White House.
4. Never buy stocks in September.
5. Sell in May and go away.
And the list goes on and on.
Garutti said if you are “investing” in the market, you should have a mental five-year commitment to that investment.
“It doesn’t mean you can’t sell. It simply means you should invest with the intent to invest for a longer period to smooth out the potential bumps along the ride,” he said. “Investing for a five-year period does not guarantee positive returns, but it could eliminate some of the short-term effects of normal market down periods.”
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