The September PastCast

September gets a bad rap.

Poor September. It’s known as the worst month to invest in stocks. But surprise! This year, it wasn’t. More on September’s reputation in a second…

This September, more strong economic news led to continued gains in US stocks, wrapping up the strongest quarter for US stocks since 2013. International stocks in developed countries continued to lag behind the US in large part due to continued concerns on international trade, but did see positive returns for the quarter. Emerging markets stocks continued to struggle and were mostly flat or slightly negative for September, which continues to provide long-term investors the opportunity to add to their positions.

So why the negative press, yo?

Every single year, TV pundits and prognosticators ramp up their bold predictions and warn investors that September has historically been a bad month for stocks. In fact, here are a few of the headlines you may have seen (but hopefully didn’t) in late August or early September this year:

Yes, it’s true that over the last century, the month of September has, on average, typically been the worst month of the year for US stocks, as measured by the Dow. You’ll hear all kinds of speculation as to why this is the case, but one common theory is that people tend to feel more pessimistic about their investments as they wrap up their summer vacations. Don’t get us wrong, summer ending can be a bummer, but this seems like a bit of a stretch. Regardless of the true reason, we won’t argue with the fact. But here’s what they don’t tell you: Over that same period, the Dow’s BEST month of the year has been…wait for it…October!

So what’s the point here? Although historical averages and ominous headlines might suggest that you should sell your stocks every August 31st and then buy back in on September 30th, don’t get caught in that trap. An average like this should not create an expectation. In the last ten years, September has actually seen gains in six of those years. And just two years ago, October was the second worst month of the year for the Dow, despite being the best month on average over the last 100. Using what’s realistically just a coincidental number to try to predict performance over any 30-day period is just one of the many market timing traps investors can be tempted into by scary headlines. Had you reacted to the above headlines in six of the last ten years, you would have been wrong. In fact, in two of those ten, the sell in September/buy in October strategy would have been a double-whammy for you, since stocks were up in September and down in October. And just last year, September was the second BEST month of the year.

An important note: Even if you wanted to, most work retirement plans like 401(k)s won’t even allow you to process more than one transaction into or out of an investment more often than once in a 30-90 day period, unless you pay a hefty fee or risk an excessive trading violation that could restrict access to trade on your account at all in the future.

The bottom line:

When you’re investing for a long-term goal that is over 25 years away and you’re making regular contributions to your retirement account, like a 401(k) or 403(b) at work, there is no point in getting caught up in this guessing game, or any other form of market timing. When you’re investing regularly over time, you’re able to take advantage of the market whether it moves up or down. Since September saw gains for US stocks, and blooom includes a significant allocation to US stocks for most clients, that portion of your account likely grew last month. If October happens to see a stock market pullback for some reason (not that we are predicting this!), it’s basically a market on sale and your money is able to purchase more shares of the funds in your plan at a discount from what they were just weeks ago! History has shown that when you stay consistent, tune out the noise, and ignore the temptation to time the market, it’s a win/win for the vast majority of long-term investors, regardless of what the market does in any snapshot of one month, or even one year!

And if you have less than 25 years until you plan to retire, blooom recommends exposure to more and more bonds as you approach retirement, so trying to guess what stocks may or may not do over any short-term period becomes even less relevant than it already should be to you.

Major props to the stock market for what it accomplished in September and the continuation of this 9+ year run that we’re on now. And hey, maybe this even continues into October and beyond, but remember that returns over 30 days have little impact at all on your returns over the next 30 years. Keep saving, stay invested, and stay focused on what’s important, instead of the click-bait headlines and ratings-hungry business news. And as always, feel free to reach out to our advisors if you ever have concerns.That’s what we’re here for!

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