I didn’t expect to cause such a stir. My earlier report on 15 Household Names To Sell Right Away drew a lot clicks—and a lot of questions. Some people read the report and thought I was advocating going to cash. This was particularly troubling for me because that couldn’t be farther from the truth.
We are nearing the end of August, which is typically one of the weakest months out of the entire year for the major market indices. The Dow is down nearly 4% this month so far. Cashing out entirely could be a mistake that costs you a bundle in the long-run, so I don’t want you to do that.
Instead, I’m going to lay out two investing strategies—based on your tolerance for risk—that I consider appropriate for this market.
The Aggressive Route
If you are an aggressive investor, you should shoot to be fully invested right after Labor Day.
This is what I’m doing with my own accounts. I’ve had some pockets of cash building over the summer months so I should be fully invested shortly after this holiday weekend.
The Conservative Route
Now if you consider yourself a conservative investor, you want to be 100% invested just before Thanksgiving.
In this case, I would dollar-cost average in. That is, instead of purchasing any single company’s stock all at once, you break it up. You purchase a fixed dollar amount of shares on a regular schedule, no matter what the share price is. By doing this, you purchase more shares when prices are low and fewer when prices are high—in the end this should lower the total average cost per share.
It’s All in the Timing
Now, these dates may seem arbitrary, but there’s a very specific reason why I chose them. You probably know already that the market fluctuates on a seasonal basis. And after three decades of experience on Wall Street, I’ve pinpointed when these shifts tend to happen.
Why Labor Day
The reason why I chose Labor Day is that it signals the end of summer—the seasonally weakest time of the year for Wall Street. It’s also because investors tend to happier and more optimistic coming off of a long holiday weekend. We saw this with the Fourth of July. Of course, when people are happy, the market is happy.
And for the aggressive investor that is cherry-picking stocks with strong financial prospects, third-quarter earnings season should be an even better time. So your goal should be to being fully invested as soon as possible after Labor Day.
Typically, the markets are their strongest between Thanksgiving and April 15. For one, like Labor Day, the Thanksgiving and Christmas holidays tend to naturally lift investor sentiment. There is also year-end pension funding that typically boosts the stock market in November and December. The strength doesn’t end when we flip the calendar. Believe it or not, January is typically the strongest month of the year from even more new pension funding.
With all of these catalysts on the horizon, even the most conservative investors want to set up a constant dollar plan to be fully invested by Thanksgiving.
The Bottom Line
For the savvy stock picker, whether aggressive or conservative, the next few months hold plenty of investing opportunities. So instead of going to cash, you may want to consider marking these holiday dates on your calendar as a reminder of what’s to come.