What month is historically the best month to sell stocks? The best month to sell stocks before a stock market decline is the end of July. Using 50 years of data, we determine that August has both positive and negative returns, and September is, in every decade, the month to avoid.
September is traditionally thought to be a down month. October, too, has seen record drops of 19.7% and 21.5% in 1907, 1929, and 1987.3 These mark the onset of the Panic of 1907, the Great Depression, and Black Monday. As a result, some traders believe that September and October are the best months to sell stocks.
The best months for the stock market are April, November, and December; the worst months are June, August, and September.
It may make sense to sell the stock as soon as the technical level is breached on the downside. If a stock breaks through a key resistance level on the upside, it may signal more gains and a higher trading range for the stock, which means it's advisable to sell part of the position rather than all of it.
Buy and hold investment strategy vs Sell in May and go away
However, there's no identifiable pattern in the data for a Sell in May strategy. In fact, Sell in May has underperformed recently. Of the past 10 years, 80% of the time, returns from May to October were positive, with an average return of nearly 5%.
"Sell in May and go away" is an adage referring to the historically weaker performance of stocks from May to October compared with the other half of the year. Since 1990, the S&P 500 has averaged a return of about 2% annually from May to October, versus about 7% from November to April.
share prices tend to fall over the summer months as big traders go on holiday and sell high-risk assets. ... the end of a financial quarter or year can also see stock markets become quite volatile, with the share price of some companies reversing direction.
Best time of the year to buy stocks. With the turn of the year comes optimism and new cash infusions, making December and January months that have historically seen stocks rise. April also tends to be a strong month for stocks.
If an investment has done well and you are concerned the profit party may be over -- or if one is in apparent free-fall -- then selling before the year-end may be your best route. In terms of an after tax-gain, "getting something is worth more than 100% of nothing," says Safar.
If you can keep an asset for more than a year before selling, this can usually result in paying a lower capital gains rate on that profit. Invest in tax-free or tax-deferred accounts. By investing money in 401(k) plans, Roth IRA accounts, and 529 college savings plans, you could save significantly in taxes.
How stocks historically perform in December. The last month of the year tends to be a good one for stock investors. “December is historically a strong month for stocks, with only April and November better going back to 1950," says Ryan Detrick, chief market strategist at Carson Group.
November through January is a particularly strong stretch; and September is the "danger" month, with an overall negative return.
The 10 am rule is an informal rule that suggests that a stock should not be bought or sold until after 10 am Eastern Time. The idea behind this rule is that the stock market opens at 9:30 am Eastern Time, and the first 30 minutes of trading tends to be volatile and unpredictable.
Though there is no ideal time for holding stock, you should stay invested for at least 1-1.5 years.
Shares with the greatest cost basis are sold first. If more than one lot has the same price, the lot with the earliest acquisition date is sold first. Shares with a long-term holding period are sold first, beginning with those with the greatest cost basis.
After another rough month for stocks, here's some good news: Prices tend to get a bump around the end of the year.
General rule: trade date controls
For most purposes, the tax law uses the trade date for both purchases and sales. For example, if you sell stock with a trade date of December 31, you'll report the gain or loss that year, even though the transaction will settle in January.
We have a calendar effect known as the Santa Claus rally, which suggests that stock prices tend to rise during the final trading days of the year following Christmas and the first two days in January.
Key Takeaways. The January Effect is the perceived seasonal tendency for stocks to rise in that month. The January Effect is theorized to occur when investors sell losers in December for tax-loss harvesting, only to re-buy new positions in January.
What is this? Thursdays and Fridays are the worst days to trade stocks during the week! Albeit the worst, both are still profitable because they benefit from the tailwind of the overnight edge: Night Strategies Trading (Overnight Trading Strategies)
According to this hypothesis, investors sell off underperforming stocks in December to lock in a capital loss for the year, thereby reducing their tax bill, which causes a temporary dip in prices. In January, prices recover when buying picks up again.
Based on the above, while the market does fluctuate and winter months do show a stronger performance on average, the market does historically trend upward.
A recent analysis by Bespoke Investment Group shows that historically, the stock market tends to gain in the first half of the month of February and lose in the second half. On average, the gains tend to be slightly larger than the losses: Between 1985 and 2022, the S&P 500 ended the month of February up 0.37%.