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Why November Through April is the Best 6 Months to Invest

By U.S. News & World Report

If you’ve been avoiding opening your latest 401(k) statement, it’s time to pay attention. History says the U.S. stock market is set to break out of the starting gate for its best six months of the year.

Just like summer changes to autumn and then to winter, the stock market has its own seasons, too. From November through April each year, the U.S. stock market has consistently produced outsized returns over the period from May to October.

You may have heard the market adage: “sell in May and go away,” but the flip side of that is “buy in October,” says Jeffrey A. Hirsch, editor at the Stock Trader’s Almanac in Nyack, New York. The publication is credited with first recognizing the seasonal phenomenon in 1987.

Since 1950, the Standard & Poor’s 500 index has gained 7.1 percent, on average, from November through April versus 1.4 percent from May through October, Hirsch says. “Our historical market research revealed that most of the market’s gains have been made from November to April, while stocks tend to go sideways and are more prone to downdrafts — as we have experienced this year — during the worst six months, May to October,” Hirsch says.

What’s drives stocks higher November through April? First, there is so-called mutual fund “window dressing,” in which portfolio managers essentially clean house before third-quarter statements are sent to shareholders.

“Nobody wants to be holding onto a stock that is not doing well. If a company by the third quarter does not appear it will be able to turn around, fund managers move them out,” says Sam Stovall, managing director at New York-based S&P Capital IQ.

The aggressive selling of stock losers generally “sets up the market for a yearly low in the October time period,” Stovall says. Historically, he has found that “October has a greater percentage of correction and bear-market bottoms than any other month.”

New money also tends to flow into the stock market at the beginning of each year as pension funds add to their holdings at that time, Stovall says. Also, investors scramble to fund their individual retirement accounts before the April 15 tax deadline, injecting capital into the equity market.

And some workers have a little extra money to invest at the end of the year. “Year-end bonuses tend to go right into the stock market, which increases cash inflows, stock buying and drives the market higher in the fourth quarter and first quarter,” Hirsch says.

While Wall Street is expecting earnings per share to decline 5.1 percent in the third quarter this year, improvement is around the corner. Analysts are expecting quarterly year-over-year advances of 0.2 percent, 5.5 percent, 7.2 percent, 14.5 percent and 13.9 percent through the fourth quarter of 2016, according to S&P Capital IQ.

“I do expect fourth-quarter gains this year and a year-end rally. We are currently adding long positions to our portfolio,” Hirsch says.

How do investors capitalize on the seasonal trend? “Investors should start looking to get back into stocks or be more aggressive in October, especially after a sell-off like we had this year. October, though feared from all the crashes and massacres, is the best month to buy stocks,” Hirsch says.

The Stock Trader’s Almanac has devised a “Best Six Months’ Switching Strategy” that can be employed with exchange-traded funds. “Around September or October, the investor can buy the major market index ETFs: SPDR Dow Jones industrial average ETF (ticker: DIA), SPDR S&P 500 (SPY), PowerShares QQQ (QQQ) and iShares Russell 2000 (IWM). And then sell them around the April to May time frame, especially after a nice run-up,” Hirsch says.

During the November through April period, Stovall has found that cyclical sectors, including consumer discretionary, industrials, technology and materials, tend to do well. Sector-specific ETFs include the Consumer Discretionary Select SPDR Fund (XLY), the Industrial Select Sector SPDR Fund (XLI), the Technology Select Sector SPDR Fund (XLK) and the Materials Select Sector SPDR Fund (XLB).

Aggressive investors could consider the S&P High Beta ETF (SPHB), which includes the 100 stocks that have the highest trailing 12-month standard deviation or more simply “the greatest wiggle over the last year,” Stovall says. For investors who may be more comfortable riding a potential roller coaster, the S&P High Beta index has outperformed the S&P 500 since November 1990, with an average gain of 12.3 percent from November through April versus an average gain of 8.1 percent in the S&P 500.

When it comes to investing in the stock market, there are no guarantees, but putting seasonal trends on your side can help boost your odds.

“I think it’s extremely important to pay attention to seasonal patterns and market cycles,” Hirsch says. “It can give you an edge in making portfolio decisions. But it is not the only factor I consider, by far. I believe you increase your probability for maximum returns using fundamental and technical analysis in conjunction with seasonal and cyclical patterns and economic readings.”

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Why November Through April is the Best 6 Months to Invest originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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