What Does a Positive January Mean for the Rest of the Year?

So, we had another January with a positive return. This January, the S&P 500 had a total return of 5.18%.

You have probably heard about the January Effect. Basically, it means what happens in January usually foreshadows what will happen for the year. I decided to look back at the returns I have to see if there was any truth to the saying. The findings were interesting.

Of the 87 years that I have data on (not including this year), I found that there were 55 years with a positive January.

Of those 55 years, 46 of them (roughly 84%) had positive returns over the next 11 months.

Here’s another way to look at it:

A Color-Coded Look at the S&P 500 Index

Total Returns for the S&P Indexes for 2012

HAPPY NEW YEAR! I hope 2013 is a great year for all the AFM readers out there!

Here are the total returns for 2012 for the S&P 500 Index, S&P Midcap 400, S&P Smallcap 600, and other indexes I follow here at AFM.

December’s .91% return for the S&P 500 Index was the 58th best for the month going back to 1926.

The geometric monthly return for all 1,044 months going back to 1926 is .779%

401(K) Dollar Limit Raised to $17,500 in 2013

The maximum dollar amount an employee can contribute to their 401(K) is increasing $500 to $17,500 for 2013. Those who are 50 and older can contribute as much as $23,000.

Let’s break down $17,500.

That’s…

$1,453.33 per month.
$47.95 per day.
$1.9977 per hour (based on 8,760 hours per year).
$.0333 per minute.

Better get to saving.

Oh, and in case you’re interested…

The geometric average monthly rate of return for the S&P 500 Index since 1926 is .779%. If a person invests the maximum of $1,453.33 per month for 25 years and gets that kind of return, they could have $1.75 million.

Something to think about.

S&P 500 Total Return Index Performance Update

Flying through the year…

October was a not-so-good month for stocks, as you can see from the graphic (click on the graphic to download the PDF version):

S&P Total Return Index Performance October 2012

Because I like stats, I thought I would share with you this graphic I put together that shows a different way of looking at the S&P 500 Index’s history:

S&P 500 Index Stats on a Month by Month Basis October 2012