Observations:
● Virtually all stock market gains occurred from November through April.
● May through October returns have been poor.
● Virtually all stock market gains occurred from November through April.
● May through October returns have been poor.
| Dow Jones Industrial Average: Historical Returns |
|
Returns for the November - April, May - October and January - December periods are shown for
1950 - 2005, 1900 - 2005 and 2001 - 2005. Dividends are not included.
1950 - 2005, 1900 - 2005 and 2001 - 2005. Dividends are not included.
Summary (1950 - 2005):
November - April averaged 7.4%. May - October broke even (- 0.1%). So... January - December
averaged 7.3% (7.4% - .01% = 7.3%). Investors would have been better off if they had invested in the
Dow from November 1st through April 30th and kept their funds in CDs from May 1st through October
31st. Stocks have not historically made money during the May - October period.
During the six month May through October period, an investor in the Dow would have lost one-tenth of
one percent, on average (- 0.1%). The above figures represent AVERAGES. There have been many
exceptions. The best May - October performance was 19% (1958). The worst was -20% (1974).
November - April averaged 7.4%. May - October broke even (- 0.1%). So... January - December
averaged 7.3% (7.4% - .01% = 7.3%). Investors would have been better off if they had invested in the
Dow from November 1st through April 30th and kept their funds in CDs from May 1st through October
31st. Stocks have not historically made money during the May - October period.
During the six month May through October period, an investor in the Dow would have lost one-tenth of
one percent, on average (- 0.1%). The above figures represent AVERAGES. There have been many
exceptions. The best May - October performance was 19% (1958). The worst was -20% (1974).
| How do I use this information? 1) Have realistic expectations for the next 6 months (May - October). We have had a 7.7% rally in the Dow (from 11/1/05 - 4/18/06). While that is a typical return for the November - April period, it is not typical of the coming 6 months. Do not allow recent gains to influence your expectations for the near future. 2) Be emotionally and financially prepared for a bumpy ride until November. 3) Make sure you have funds available to invest around November 1, 2006 since that has historically been the beginning of the strong half of the year (7.4% average since 1949). |
| In the next issue of Investment Tips: Declining interest rates are typically good for stocks. But... the current period is not following the historical pattern. You'll see the 90 year record in the next issue of Investment Tips! |
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4/21/06
| Link to Previous Issue of Investment Tips |
| Does April 15th Put a Lid on Stocks? You can bet on it! Click the above link to the 50 year record. |
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