The stock market has its ups and downs.
But as all investors know, over the years, there tend to be more gains than losses.
That conventional wisdom holds true for all months of the year except one — September.
Since 1950, the Dow Jones Industrial Average has averaged a 0.8% loss in September, while the S&P 500 index has averaged a 0.5% decline.
The decline is much sharper in some years than others. The infamous stock market crashes of 1929, 1987, 2001 and 2008 all began or picked up steam in September.
The September Effect is a worldwide phenomenon, impacting equity markets globally.
At least part of the story behind these declines are the bad news that tends to occur in September. 9/11, a majority of major hurricanes, massive wildfires, and the start or worsening of both world wars happened in September.
But the September Effect also seems to be unrelated to the headlines, with declines occurring in many quieter years too.
These days, almost all of us are invested in the stock market one way or the other, with 401(k)s, educational savings accounts, and other financial products.
Here’s some tips for how you can stay afloat during September.
FOCUS ON SAFER INVESTMENTS
Stocks of companies that are essential to the economy — think Procter & Gamble or General Electric — tend to underperform in good times but are safe bets in uncertain times.
That’s because everyone needs toothpaste, smoke alarms, lightbulbs and other essential items.
KEEP AN EYE ON GROWTH SECTORS
Emerging sectors can also be a good place to look for resilient investments.
For instance, a decade and a half ago, if you invested in Apple Inc. or Amazon, you’re close to getting rich today.
AI, cybersecurity and medtech would be examples of similar investments with great promise today.
But even in those fields, stick to the companies that seem to be leaders at the moment, since many smaller startups either fall by the wayside or get absorbed by their larger peers.
READ HEADLINES LIKE AN INVESTOR
Even in bad times, someone always profits.
September may be notorious for disasters, but that means profits for some companies.
A savvy investor knows that when a major hurricane strikes the U.S. Gulf Coast, for instance, there will be a need for reconstruction, as well as an increase in commodity prices. So Home Depot or oil stocks might be good choices.
Geopolitical tensions can be up times for defense manufacturing such as Boeing.
Consider making September the start of your investing year Many cultures around the world celebrate the new year in springtime, but many others choose early autumn as the beginning of a new 365-day cycle. Our academic calendar follows that approach, with the start of fall classes in late August or September.
As an investor, consider starting your financial year in September, keeping an eye on developments in September as a possible harbinger for what’s ahead in the other months. Remember, many of the factors that drive markets lower in many Septembers continue to influence stocks for months in the future.
Consider reaching out to a business professor at one of the local colleges or universities for some unbiased advice on the trends in the market so you can be ready.
But also, don’t forget to enjoy your September. Worrying too much about finances can rob life of its pleasure.
As the dog days of summer come to an end, enjoy some trips to the beach and the local mountains. You’ll be helping the economy practically while also claiming the positives of this often spooky time of year.