What is the best time of year to buy and sell shares?

Shares can be treated differently at different times of the year – some months the market historically trends up and others down. Here we look to see what are the best times of year to be buying and selling shares in the stock market.

February – March

These tend to be middling kinds of months. People are happy to take any profits gained over Christmas and re-group for the year ahead. Don’t expect big advances and it always pays to have a bit of cash on the sidelines during these months to maybe buy shares for the April lift

April

April is when the post Christmas blues have faded and we get our first proper holidays of the year. Its amazing what a few days off does to traders and around Easter the market does really well. Its often a time for short term gains. The market has been stronger in April than any other month historically, and since the 1970’s the probability of a positive return is over 70% so it may be worth adding a few long positions mid-march to catch the April lift.

May-July

I don’t need to remind you of the old adage “Sell in May and come back on St Ledger’s Day” but it true. May is usually the start of some under-performance and currently challenges September to be the weakest month of the year. Time to be wary, maybe take some profits and keep cash in hand. June is pretty much as May with July not doing much better. Basically May-July are not the best months so maybe spend the time researching a few shares to buy later in the year or even better, get yourself off on holiday!

August

Out of the Doldrums of May to July usually comes a great August. A lot of people are still away with school holidays with hedge fund managers being dragged around Disneyland with their kids. This creates less volume which means more volatility! If you’re on the right side of this it can be a blessing, if not simply wait it out. Market historian David Schwartz places August as the third best trading month of the year citing “Good gains can often be achieved in August. But of course with the volatility you have to get the right entry price”. One thing to look out for is companies reporting in August. There isn’t many but if you find one that produces a strong statement then you’ll often find the share price responds very well on smaller volumes.

September

Yuck! September has the worst record of any month and on average falls just over 1%. The upside is usually pretty limited but the downside can be severe as the big boys get back to their desks and correct anything that’s been going on over the last few months. If you fancy shorting then this could be the month to give it a try.

October – November

October to November are not as bad as you might think. There have been some stock market crashes during these months but stripping them out, October is usually a pretty good month to buy shares. November isn’t up to much but buying the right shares in October and November can be a smart move in the lead up to Christmas and the Santa rally!

December – January

Christmas! And it really can be! December is one of the best months to buy shares. January too. While its cold outside the markets are usually at boiling point. Statistics support this with the strongest week of the year for the market being the 51st week. The second strongest.. you guessed it, the 52nd week! The probability of positive returns in December is just under 70% which should not be ignored. It’s probably down to simply human psychology – everyone feels good with the festive season upon them and New years just around the corner. By January, we’re all left with a bit of a hangover and searching to find what’s next to look forward to. That’s why February isn’t too great either.

We’ve tried to highlight the best times of the year to buy and sell shares but of course this is all very generalized! and we would not for a second suggest this is how it will play out every year. There is however some logic here and being based on historic trends if you have the right portfolio mix with adequate risk parameters (such as stop losses) it could be worth giving it a go to see how it works for you.

Let us know what you think in our comments below and Thanks for reading.