Even the historical statistic shows NOV - APR is time to invest <G>:
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Saturday November 24 8:13 AM ET
View: Time to Buy? History Says 'Yes'
By Nick Olivari
NEW YORK (Reuters) - Forget the outlook for profits and the economy. It's time to buy stocks -- at least from a historical perspective.
An investor buying by Nov. 1, then selling on April 30 is almost guaranteed to make money without even blinking, the soothsayers say.
The Stock Trader's Almanac notes the Dow Jones industrial average has gained a total of 9,471.26 points in the last 50 years in the months of November through April.
Gains in the other six months -- May through October -- totaled just 850.94 points over the same 50-year span.
Need a little more convincing?
Since 1971, the Nasdaq Composite index has gained an average 3.4 percent for the months of November through April, while the Standard & Poor's 500 index has climbed 3.3 percent, according to BigTrends.com, a Kentucky-based research firm.
That compares with an average gain of 0.3 percent in the Nasdaq Composite for the May-through-October period, and a rise of 0.5 percent for the S&P 500 during those six months.
On the surface, the numbers make a convincing case that it's easy to buy an index and fall asleep at the investment wheel.
``Sure enough, historical data says you would have gained more over time with this strategy than if you had stayed invested,'' says Eugene Profit, portfolio manager with Profit Investment Management LLC, in Silver Spring, Maryland, which oversees $78 million. ``But it's all easy in hindsight.
NO GUARANTEE
Scratching a little deeper, indeed, shows that nothing is a sure bet. As Profit says, using a time-worn phrase known to mutual fund investors who read the small print, ``Past performance is no guarantee for the future.''
While an investor would have earned 47 percent on his money buying the Nasdaq Composite in November 1990 and selling in April 1991, or 24 percent buying the S&P 500, there have also been some spectacular deviations from the supposed rule.
The most recent was the six months ended April 30, 2001, when the Nasdaq slumped 37.2 percent and the S&P 500 fell 12.6 percent.
The indexes experienced similar drops in the six-month periods that ended April 30 in 1973, 1974, 1982, and 1990.
So why would an investor take the plunge on a trading strategy that relies on ignoring the market for other than two days a year?
``It's not whether you believe it or not,'' said Fred Kuehndorf, portfolio manager with Ashland Management Inc., which oversees $2 billion in assets. ``It's statistically true.''
To be sure, though, Kuehndorf does not recommend investors trade stocks based on a perceived seasonal move, either. At the least, such a strategy ignores issues like capital gains that incur taxes, he says.
It also relies on having the willpower not to change strategies, but instead to make the same trades year after year -- something that most investors find psychologically difficult, given that the market's day-to-day gyrations receive maximum media exposure.
``In times of rallies and declines, people change their allocations,'' Kuehndorf said. ``No one would really stick to this over 60 years.''
PLAIN DANGEROUS
Professional money managers say with the economy teetering on the brink of the official definition of recession -- two quarters of contracting economic output -- it's just plain dangerous to invest with one broad-based strategy.
And the most trusting technician will admit that statistics like these won't tell you which stocks to buy. According to historical trends, you have to buy an index; sooner or later, you are bound to come out ahead.
Though that approach worked wonders in the late 1990s when the S&P 500 was gaining 20 percent-plus a year, there was no rush of money managers then to mimic the index, just as there are none now who will buy in November and sell in April, without any other consideration.
``You can't impose artificial time frames,'' said Buck Newsome, managing director at Columbus, Ohio-based Cambridge Financial Group Inc., which oversees $300 million. ``There are stocks you will want to sell (soon), and others you will want to sell in several years.''
Newsome equates the ``buy in November, sell in April'' strategy with gambling more than investing. He emphasizes that with the market declines in the last 20 months being the worst in 30 years, a lot of historical trading patterns have been thrown out the window.
But if like most retail investors and even some professionals, you are sucking your thumb for ideas, it may be worth a bet -- particularly if you are one of the thousands of investors mauled in the last bear market and scratching your head as to what to do.
After all, tax breaks and the Fed's 10 interest-rate cuts have to kick in at some point. So even if you can only stomach one six-month period to buy and then sell, this is one worth considering. History is on your side.
For the week, the Dow Jones industrial average (^DJI - news) ended at 9,959.71, up 92.72 points or 0.94 percent. The Standard & Poor's 500 index (^SPX - news) gained 1.03 percent, or 11.69 points, during the week to finish Friday's abbreviated trading session at 1,150.34. The tech-laden Nasdaq Composite index (^IXIC - news) inched up 0.23 percent, or 4.62 points, to close the week at 1,903.20. Friday's stock trading session ended early at 1 p.m. EST due to the Thanksgiving holiday, observed on Thursday.
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