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Should I avoid buying ANY stocks in September?

I've always been under the impression that September is the wrong time to buy stocks, but with the summer we've just had, can I afford to miss out on some of the discounts I see?

Sep 04, 2012 by Jackie from Knoxville, TN in  |  Flag
4 Answers  |  4 Followers
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12 votes

Hi Jackie,

An old saying on Wall Street is “sell in May and go away” which comes from the Stock Trader’s Almanac. Generally the 6 months from May through October have a lower rate of return than November through April. Lower does not mean negative.

Since the goal is to buy stocks low and sell high, if this adage held true it would be better to buy in October and sell in April. Unfortunately it’s never that simple.

Buying individual stocks below their intrinsic value, within fertile sectors, and with positive momentum is the most successful strategy. It is much easier to say than to do.

I offer model portfolios for anyone to use currently at no cost. These include a stock portfolio of companies I am buying currently for my clients. You may access these portfolios at www.Davesfavs.com . The user id is “free” and the password is ”markets”.

When buying stocks for my clients, I focus on value, future earnings potential, sustainable competitive advantages, and momentum. I am not concerned with the month of the year. I seek rates of return greater than 9% per year. I am committed to the asset category for 5 years or more.

You should work with a professional to help you insure your investing is in alignment with your financial goals and tolerance for risk.

Good luck, Dave

Comment   |  Flag   |  Sep 04, 2012 from Thousand Oaks, CA

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7 votes
Jesse Level 18

If you see great "discounts" I wouldn't worry about what month it is. Still, I think it's important to consider general "market risk." To determine this I like to look at fundamentals (overall valuation), technicals (the charts), sentiment (general investor mood) and the macro scene (what's going on economically and politically on a global scale). To ameliorate market risk I suggest individual investors adequately diversify, dollar cost average and regularly rebalance their portfolios to maintain an asset allocation mix that suits both their goals and temperament. Best of luck.

Comment   |  Flag   |  Sep 05, 2012 from Bend, OR

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5 votes
Aram Level 16

The most common mistake investors (both amateur and professional) make is trying to time the market. There are all sorts of market timing theories: expecting market trends to continue, investing counter to market trends, and trying to catch peaks and valleys. There has been extensive research that shows these investment strategies vastly under-perform a simple buy and hold strategy. As Ben Graham said, ""In the short run, the market is a voting machine, but in the long run it is a weighing machine."

My advice is similar to the other esteemed answers here: invest in undervalued stocks according to your asset allocation plan. Look for stocks with strong fundamentals (cash on hand, low debt, and good free cash flow are important) and dollar cost average paying little attention to market levels. There is a caveat, I look to take some capital out of the stock market and put it into bonds during stock bubbles (i.e. the late 90s), and add more than the usual dollar cost average during severe bear markets (i.e. 2008-2009).

If you would rather not do the research on individual stocks, or you don't want to hire a professional investor, value stock ETFs are another avenue to explore. These generally outperform the market and have very low fees.

Comment   |  Flag   |  Sep 21, 2012 from San Francisco, CA

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4 votes

Jackie I don't think the month of the year should be an issue. If the fundamental's of the company and outlook is good and the stock fit's into your portfolio from a diversification standpoint you should consider proceeding. I would recommend seeking an advisor in your area. Mark Schreiber

Comment   |  Flag   |  Sep 04, 2012 from St Louis, MO

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