Buying stocks may not be at the top of your priority list right now. Instead, you may be rushing out to office parties or planning get-togethers with friends. But the month of December actually is a terrific time to get in on the market, and that means investing also should be on your to-do list this month.
In fact, I'll go one step further and say I'm begging you to buy stocks before January. Now, you may think this is all about the January Effect, or the idea that stocks tend to rise in the first month of the year -- so to benefit from that, you should buy stocks now. But I have a stronger argument than that, and it just may spur you to hit the buy button for some of your favorite players.
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The January Effect
First, though, a quick bit about the January Effect. Some studies have shown this outperformance in the month of January exists, especially in the case of small-cap stocks. But in recent years, it's been much less marked, and a quick look at S&P 500 performance shows the index only rose in two of the past five years -- January of this year and January of 2019.
So, if you rush out to buy stocks just to benefit from the January Effect, you may be disappointed. On top of this, betting on this potential phenomenon is a short-term investing strategy -- and you can greatly increase your winnings by focusing on the long term instead. Even if the market climbs in the first month of the year, the impact of that on your holdings over the long term probably will be negligible -- so I wouldn't tell you to run out and buy stocks just to benefit from this possible movement.
Now let's get to why you really should buy stocks before January. And that's because, right now, you'll find many great buying opportunities -- among stocks that have struggled this year as well as among this year's winners. For example, Amazon (AMZN 3.43%) is cheaper in relation to forward earnings estimates than it was a couple of years ago.
AMZN PE Ratio (Forward) data by YCharts
And today's price looks reasonable for a company that successfully rebounded from a difficult 2022 and has positioned itself for long-term growth.
Another example is CRISPR Therapeutics (CRSP 0.34%), a gene-editing company that recently won approval of its very first product. As revenue starts rolling in next year, the shares could continue climbing.
And for a losing stock ready to take off, consider e-commerce company Etsy (ETSY 0.34%), trading for a bargain at less than 20x forward earnings estimates even as it's returning to growth.
Take advantage of opportunities
If you have cash to invest, it's a great idea to grab opportunities when they arise rather than waiting -- the particular stock you have your eye on may trade for a good price now, but it could take off at any moment.
Now here's another reason to get in on stocks sooner rather than later. If you're looking at dividend players, you might want to consider the companies' next payout date. For instance, if you want to benefit from Costco Wholesale's next payment, you'll want to buy the shares before the Dec. 27 ex-dividend date.
Finally, December, without the distraction of a lot of corporate activity, is the perfect time to examine a company's latest news -- including earnings reports. And often, companies will have made forecasts for the coming year, so you can get in early on next year's potential winners.
All of these points support the idea of buying stocks before January, but that doesn't mean you should stop investing after ringing in the new year. Instead, all of this simply means one important thing: In investing, like in many other activities, seize the day. The market is ripe with opportunities right now, and the opportunities seized today could pay off big over the long term.
