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September is a Bad Month For Stocks
By JLP | September 6, 2007
After putting yesterday’s The Best and Worst Months for the S&P 500 Index (1926 – 2007) post together, I decided to take a closer look at the month of September. Here’s what I found out.
It’s typically a bad month for stocks – or at least the S&P 500 Index. Take a look at the following graphic which looks at September’s return from 1926 – 2006:
Of the 81 Septembers represented in that graphic, 41 of them were up and 40 were down. The average September return for the entire time period (1926 – 2006) was -.76%. No, it’s not horrible but it is interesting that September is the only month that has a negative average return. Just for fun, I looked at different time spans:
Bottom line: September is a bad month for stocks but not bad enough for most people to be able to take advantage of it by selling in August and buying back in October. Why? Transaction costs. Remember, for these examples I’m using the index itself, not a mutual fund or exchange-traded fund. That means there are no transaction costs factored in my calculations. I’m afraid once you added in any transaction costs, it would negate any arbitrage opportunities.
So, when you look at your 401(k) statement or brokerage statement and you see that you were down in September, remember this post.
Topics: Index Funds, Investing | 18 Comments »
September 6th, 2007 at 11:40 am
Even with no transaction costs, I’d never sell off prior to september and then buy back at the end. There is really no reason for the market to have gone down in september.
Think of it this way. An 80 year span of individual months is only 6.66 years of total time. Look at annual returns over 80 years and split them into 10 spans of 6.66 years. you will probably find that the results aren’t that much different. Now, if this trend continued for, say, 160 more years, that would be equivalent to 20 total years of Septembers.
Also. We could see september al of a sudden do well for a couple years and Febuary tank for a couple years and all of a sudden febuary looks horrible over the last 80 years.
September 6th, 2007 at 1:15 pm
This is an excellent source of information however, this will be one september worth investing in. The market fluctuation is repairing itself, just ironic this is occurring during September.
September 6th, 2007 at 1:25 pm
Some of my stocks advisor said that it’s the moment to BUY a stocks. Because after “bad september” almost trader believe all stocks will rise. What do you think? Btw..It’s great blog ! I gotta a lot knowledge here..
September 6th, 2007 at 1:57 pm
Well, September is when I’ll be putting a big chunk into my roth from the index fund, since for the past month or so I haven’t been able to invest due to some bank validation errors when I updated my banking info at Vanguard (my fault, not theirs).
So, I have some money earmarked for it that hasn’t been spent, and I’d much rather that the market tank when I’m getting ready to buy since I’ll not be offloading it for a good bit of years.
September 7th, 2007 at 10:55 pm
September’s average monthly return over the years is somewhat skewed due to some major losses in the month in 1929,1933, and 1937. The month is certainly not great for stocks, but the more recent history isn’t as bad.
September 8th, 2007 at 12:03 am
Aaron,
I think the last graphic shows that it is not skewed.
September 8th, 2007 at 1:45 am
I may be down, but not out!
September 9th, 2007 at 12:47 am
[...] All Financial Matters reminds us that September is historically bad for stocks. (A word to the wise …) [...]
September 9th, 2007 at 10:35 am
[...] All Financial Matters: September is great for pools, barbecues and yard parties, but really, it’s not been a kind month for stocks. Here’s the proof. [...]
September 9th, 2007 at 8:50 pm
[...] Investing fascinates me. I love to read about it in Money Magazine and watch Cramer on CNBC – even though I have no money to invest. If anyone needs a portfolio manager, let me know. Anyway, I thought this was an informative post at All Financial Matters that details the historically poor performance of the stock market in September. -rocketc [...]
October 1st, 2007 at 10:21 am
[...] Remember my post from a month ago about how September was a bad month for stocks? Well, this past September was pretty darn good (and my numbers don’t even include dividends): [...]
October 1st, 2007 at 7:47 pm
[...] Remember my post from a month ago about how September was a bad month for stocks? Well, this past September was pretty darn good (and my numbers don’t even include dividends): [...]
October 3rd, 2007 at 12:13 pm
[...] Remember my post from a month ago about how September was a bad month for stocks? Well, this past September was pretty darn good (and my numbers don’t even include dividends): [...]
October 3rd, 2007 at 12:33 pm
[...] Remember my post from a month ago about how September was a bad month for stocks? Well, this past September was pretty darn good (and my numbers don’t even include dividends): [...]
September 29th, 2008 at 1:27 pm
[...] and in case you’re interested, here’s how this September’s performance compares with past Septembers. SHARETHIS.addEntry({ title: “THUD!”, url: “http://allfinancialmatters.com/2008/09/29/thud/” [...]
September 29th, 2008 at 3:20 pm
i didnt hear a THUD!.. I heard.. BUY!! BUY as much as you can get your hands on.. Everyone is scared.. its time to get greedy if you got the money to do it. The S&P is having a hell of a sale today… It’ll come back once everyone stops freaking out. This sell off today is nothing more than everyone in panic mode.. Me.. I’m in hidden opportunity mode.. and I’m taking advantage of it as much as I can.
September 29th, 2008 at 3:24 pm
Oh yea.. I almost forgot… When riding a roller coaster, you only get hurt if you jump off.
March 2nd, 2009 at 11:44 pm
[...] High Cost of Low Risk Investing from fivecentnickel.com September is a Bad Month For Stocks from AllFinancialMatters 12 Secrets Your Car Insurer Won’t Tell You from Beachgirl’s [...]