Why September is the worst month for investing?

Before we get into more details, here is what most people believe about the September Effect.

September is considered to be the worst time of the year for stock market returns. In fact, many analysts claim that over the last 90-odd years of the modern stock markets, September has offered negative average returns – worse than any other month.

Why is that so?

Many experts believe that in most western countries, investors come back from their vacations in September and start trading leading to increased volatility in the markets. Another explanation is that many investors try to harvest their tax losses by selling their stocks in September leading to a drop in prices. Another probable cause can be the fact that many Mutual Funds have their financial year-end in September. Also, fund managers usually tend to redeem their non-profit positions before the year ends.

How to play the September effect?

we recommend that you focus on the fundamentals of investing. You must assess and analyze the assets that you are investing in. Keeping a long-term investment horizon is known to generate more stable returns and help you avoid unnecessary speculation. It is important to be realistic with your expectations from your investments so that you can keep the risks in check. The performance of the markets at certain times of the year is a good statistical observation but buying or selling stocks assuming that these effects will recur can be counterproductive.