November 16, 2011 | In: General
When Is the Best Time to Invest in the Stock Market?
If you don’t have time to read the rest of the article then here’s the answer: “The best time to invest in the stock market is the middle of December of any year”.
Now, let me explain to you if you have the time to read on…
There are many small and casual investors that lose money on their stock investments. One thing that they can do to diminish their losses is to sell their stocks and then claim their loss in the stock market as a “capital loss” in their tax statement. Now, when do these investors sell their stocks? Well, for the majority, they start selling their stocks near the end of they year (they cling to hope until the very last moment). By the end of December, every one of these investors would have already sold his losing shares. So this means that, around that time, the underperforming stocks (the stocks that these investors lost money in) will reach a bottom.
Now, once the taxation year ends (which is the same as the end of the Gregorian year for most of us), these small investors start re-buying the shares they have sold in December. The buy transactions usually happen from January until mid February.
This phenomenon (investors selling their losing shares in December and buying them back in January-February) is called the January Effect.
As you can see from the above, the January effect provides investors with the best buying and selling opportunities. Buy in the middle of December at low prices (when everyone is selling and prices are at bottom) and sell near the end of January/beginning of February (when the buying spree is almost over and prices are very high).
It’s amazing to see that this trick works all the time, and yet very few investors take advantage of it…
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