The old investment adage of “buy low, sell high” is an odd concept.
Most experts will tell you timing the market is fraught with danger. No one, professional or amateur, has a crystal ball.
So how are you supposed to buy low and sell high when you don’t ever truly know when the S&P/ASX 200 Index (ASX: XJO) is “low” and “high”?
With that caveat in mind, it is still interesting to see historical patterns in market movements.
January to April seems to be a golden period for shares
There is the famous Santa Rally, which sees ASX shares go up in December more often than not.
But prominent Bell Potter adviser Richard Coppleson has dug up another interesting ASX 200 trend that is especially relevant right now.
“Over the last 29 years, one of the best buying opportunities has been to buy during the sell-off that the market has most Januarys and holding for 3.5 months until the end of April,” he posted on Livewire.
“This strategy has had a phenomenal winning success rate of 82%.”
Out of the 29 years, this philosophy has seen positive returns 24 times.
The average return over just those 3.5 months has been a huge 5.75%. Before the March 2020 COVID-19 crash, that average was running at 6.57%.
“Considering the average gain in the ASX 200 each year over 12 months since 1993 has been +6.56%, this is significant,” said Coppleson.
“While the 24 times it was UP the return was a massive +7.8%.”
Even in bad years, this strategy can help
Remarkably, even in the 8 years that the ASX 200 lost money for investors, the January to April strategy mostly performed better than the yearly return.
Those 8 years saw an average of 0.34% positive return for Coppleson’s 3.5-month tactic, while the yearly losses averaged 11.64%.
“Every year bar just one — 2020 where COVID stuffed it all up — all the others OUTPERFORMED significantly… by a massive margin vs where the market closed for that year.”
This is all to say historically it seems to be wise to be fully invested in ASX shares during the first few months of the year.
“If you are worried about the year then reducing net long positions at the end of April can be a very good strategy.”
The post This strategy for investing in ASX shares has an 82% success rate appeared first on The Motley Fool Australia.
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More reading
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- 2 ASX 200 shares that could be top buys for growth
- The Macquarie (ASX:MQG) share price is down 10% in 2022, time to jump on it?
- These were the best performing ASX 200 shares last week
- Here are the top 10 ASX shares today
Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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