The summer months typically bring to mind thoughts of warm weather, barbeques, and trips to the cottage or the beach. But just because you’re on vacation doesn’t mean your investments should be.
Perhaps you’ve heard of the “summer doldrums” in the stock market or the old advice to “sell in May and go away.” However, this kind of thinking isn’t as popular these days in our hyper-connected, always-on world. Today, the market is never farther away than your smartphone. And while it’s true that trading volumes can decline and equity market returns be comparatively slower during the summer than in other seasons, consistency is vital when investing. That’s why you can use summer investing to your advantage.
The old notion that the summer is a less attractive time to invest may not stand up to the evidence. In recent years, solid returns have come during the traditionally ‘slower’ summer months. Between May and September 2017, the S&P 500 was up nearly 6%. During the same interval in 2018, it was up 10%. And since 1928, the cumulative average returns between June and August have been 2.9%. Only the three-month stretch of November to January has performed better over the same span.
So, if keeping your money in the market over the summer turns out to be the best idea, how should you spend those months to help set up your portfolio for year-round success?
Review, Research, and Reposition
With the markets usually somewhat quieter during the summer, take the time to review your holdings. Summer can be a great time to reassess and perhaps reposition elements of your portfolio. Keeping your money in the market is the key to long-term investing and growth over time, but that doesn’t mean you shouldn’t reassess your financial goals occasionally to ensure your current investments help you meet those objectives.
Likewise, summer is an excellent time to have a look at your investment fees and expenses to make sure they are reasonable and in line with your expectations and long-term goals.
Staying active in the market during the summer can also yield fruit over the long term if you’re able to pick up the occasional bargain while other investors may not be paying as close attention. Because liquidity is lower during the summer than at other times of year, there can be more volatility in stock prices throughout this period. For the canny investor, this can be a great opportunity to add bargains to their portfolios and those of their clients.
Be ready to take advantage of any unexpected market shakeups or bumpy patches over the summer. Develop in advance a list of target investments to watch closely during this time and be ready to move if they suddenly become more affordable. Remember: by buying when prices are low, you lower the average cost of your whole portfolio, which will help boost returns over time.
Staying Involved and Invested in the Summer
While the old advice might have been to take the summers off, in today’s investing environment, there can be real upside to staying the course during the summer and using that time to refine your investments and strategies. Review and research your investments to ensure they’re still helping you meet your long-term goals. And be ready to pounce if summertime volatility helps in adding some choice investments to your portfolio.
What other ways can you benefit from staying in tune and involved in the markets with summer investing? How can you work the summer market to your advantage and set your portfolio up for year-round success?
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