Armchair investors wanting to boost returns might want to note down two significant dates in their diaries: November 1 and April 30. According to analysis by the fund supermarket Interactive Investor, buying a portfolio of shares on November 1 and selling it on April 30 has, over the past 20 years, outperformed the FTSE All Share to an impressive level.
It says shares generally perform better over the winter (between November and April) than over the summer (between May and October). Investing around bonfire night can produce fireworks, apparently. For example, starting with £100 in 1995, someone who had invested in the market continuously for the past 20 years would have seen their money grow by 100 per cent to £200 (excluding dividends).
However, if they had only invested in the market between November 1 and April 30 every year then that £100 would be worth significantly more at £316, an increase of 216 per cent over the same time period. Conversely, if an investor had chosen only to invest over the summer months they would have lost money; their original £100 would be worth just £69.
Even over 10 years, there is a compelling difference in returns.
Rebecca O’Keeffe, head of investment at Interactive Investor, says: “Year after year, the data suggests that investing over the winter months is far more favorable than over the summer. Between November and April, stocks are less volatile, sentiment is more positive, the weight of liquidity is strong and hence the performance versus the rest of the year is unmatched, either in risk-adjusted or absolute terms. There are no conclusive studies on this subject.”
Claire Walsh, head of advice at unbiased.co.uk, says: “While this data appears to show a trend, I remain sсeptical and as always it’s important to understand that past performance is not a guide to the future.”
“Private investors shouldn’t try to ‘time’ the market, and the idea of dipping in and out could be an expensive and time-consuming activity.”