The September silly market siren song is upon us, with statistic after silly statistic trumpeting the potential for a drop in stock prices this month.
We are told that the S&P 500 index has fallen in 30 of the 51 Septembers since 1951. And get this: The average decline is 0.44%! (It's 1.2% for the Dow.) Then we're told that October has produced some pretty good losses, too. You know, like 1987 and 1929.
Gee, I guess we all just better sell everything and head for the hills and take up Survivalism.
You'd think the famous Weill/Anderson song went this way:
When the autumn weather turns the leaves to flame
One hasn't got time for the waiting game
So sell all your stocks and forget why you came.
On any given day -- let alone month, year, or decade -- the market might drop. Or rise. If you can't handle that, don't invest in stocks. We already know that, as a rule of thumb, it's not the place for any money we must absolutely, positively count on in the next five years or so. We also know that investing requires patience and education. That's why savvy Foolish investors aren't buffeted by prognostications about "the market."
Let's say these investors owned well-known companies Microsoft (NASDAQ:MSFT), Intel (NASDAQ:INTC), Pfizer (NYSE:PFE), Wal-Mart (NYSE:WMT), Starbucks (NASDAQ:SBUX), Coca-Cola (NYSE:KO), Pepsi (NYSE:PEP), and Citigroup (NYSE:C). They know that one month here or there is nothing compared to what they have done the rest of the time:
Sept Return Sept Return Sept Return Company '00 to Fri. '01 to Fri. '02 to Fri. Microsoft -14% -24% -10% - 7% - 7% +13% Intel -45% -62% -27% + 3% -12% +81% Pfizer - 4% -31% + 5% -20% - 7% - 3%Wal-Mart - 1% +25% + 3% +25% - 5% +15% Starbucks - 9% +42% -11% +68% 0% +42% Coca-Cola 5% -14% - 4% - 8% - 4% -11% Pepsi - 8% 0% + 4% - 3% - 3% +18%Citigroup 9% -12% -13% + 4% + 1% +52%S&P 500 6% -28% - 8% - 9% - 7% +17%NOTE: All include dividends.
Sure, September selling might have avoided a few bad months for a few stocks, but even longer holding periods for Intel and Pfizer have outperformed for two of three years. And September selling would have made you miss a market-beating return by holding from the end of August to last Friday's close for most stocks here in most years.
As for the long-term winners, how would you feel now if you had sold Wal-Mart or Pepsi or Starbucks at the one of these Augusts? Would you have bought again? How would you have know when to do so? How much would your taxes and commissions have bitten into the returns?
Thanks, but we'll continue doing what makes sense. If we don't want to learn to understand individual businesses, or even if we do but want to have a bedrock part of our portfolio, we'll invest regularly in a broad-market, low-expense stock index fund. For stock ideas, we'll read newsletters we can trust, such as our shiny newcomer Income Investor for stocks that pay you while they grow. We'll stay focused on good or great businesses at reasonable prices, and we will buy and sell them on business fundamentals and valuation, not September's Silly Market Song. So cue the orchestra, please:
Oh, it's a long, long while from September to September
The days grow longer and they grow shorter
When the autumn weather turns the leaves to flames
Investors remember the June of sun and games!
Have a great week!
Senior Analyst Tom Jacobs doesn't sing professionally, but he does love Sinatra. He owns shares of Microsoft and other companies you can find in his profile . Read all his columns in this handy archive.
