Countless factors influence the stock market—from macroeconomic trends and political developments to emerging technologies. Despite this complexity, certain months consistently deliver above-average market performance year after year.
Market experts offer various explanations for these monthly patterns, but one fact remains clear: not all months are created equal for stock investing. This guide explores the best month to buy stocks based on decades of historical data.
Let’s dive in!
Should You Try to Time the Market?
Before examining which months outperform and which underperform, we need to address a crucial question: is market timing even worthwhile?
Market timing has compelling advantages and significant drawbacks. The strongest argument for timing your stock investments is the potential for superior returns. If you can trade stocks at their lowest points and sell at their peaks, your portfolio should outperform investors who buy whenever convenient.
However, realistic expectations about timing accuracy are essential. Even professional traders and fund managers who monitor markets daily struggle to consistently beat major indices.
Mistiming market bottoms or tops can result in losses or missed opportunities. Additionally, timing strategies typically require more effort and attention than systematic, schedule-based investing.
Historically Strong Months for Stock Purchases
For those interested in timing investments, focusing on historically strong-performing months offers a straightforward approach. This means analyzing extensive historical stock market data.
From 2000 to 2020, April emerged as the stock market’s top-performing month. The S&P 500 delivered an impressive average return of 2.40% during April over this 20-year period. Extending the analysis back to 1980 confirms April’s dominance—the S&P 500 averaged 1.97% gains during April over four decades.
October and November rank as the next strongest months based on 2000-2020 data. The S&P 500 averaged gains of 1.17% in October and 1.08% in November during these two decades. Looking back to the 1980s reveals similar strength, with average growth of 1.13% and 1.55% respectively during these months.
January and December also demonstrate historical strength. Early in the year, investors often re-enter markets aggressively, creating the well-known January effect that particularly benefits small-cap and value stocks, including mutual funds.
Since 1980, the S&P 500 has averaged 1.07% growth in January and 1.22% in December. Interestingly, these months have struggled in recent decades, with January posting average returns of –0.28% and December managing just 0.50% from 2000-2020.
What drives these seasonal patterns? Several theories exist, including a holiday shopping surge from November through December. Many investors also engage in tax-loss selling at year-end, particularly for underperforming stocks.
April’s strength often coincides with first-quarter earnings releases and annual guidance updates from major companies. Remember, however, that some seasonal patterns may simply reflect random chance, and historical performance doesn’t guarantee future results in any given year.
Historically Weak Months for Stock Purchases
While certain months consistently outperform, others have historically underperformed when markets tend to decline. You may have heard the adage “sell stock in May and go away,” though May has actually produced positive S&P 500 returns historically.
September stands out as the weakest month for stock purchases over the past four decades, with the S&P 500 averaging –0.52% returns. June and August follow as the next poorest performers, with 40-year average returns of 0.28% and –0.08% respectively.
This summer weakness may partly stem from the self-fulfilling nature of “sell in May” sentiment. When enough bullish investors exit positions in early summer—typically June rather than May—bearish forces dominate markets until autumn. The return of optimistic investors in October then drives renewed buying activity and market gains.
Optimal Daily Trading Times
Market opening typically brings elevated trading volumes and volatile stock prices. Opening hours incorporate overnight news and events since the previous closing bell, creating price swings that many investors—particularly beginners—underestimate.
Experienced day traders understand these patterns and capitalize on opening volatility for quick profits. However, novice investors should avoid this high-volatility period to minimize potential losses. For seasoned traders, the first 15 minutes after opening represents prime trading opportunity.
Mid-day hours between opening and closing periods offer relative stability for trading activity. Many traders prefer this calmer environment with its steadier price action and potential for consistent returns. Beginners should consider concentrating their trades during these stable hours.
The final hour builds volatility as volume increases, making it an unsuitable time for major trades.
Best Day of the Week to Buy Stocks
Just as certain months historically outperform, specific weekdays may offer advantages. Many traders and institutional investors believe particular days systematically deliver better returns, though concrete data supporting this belief remains limited.
Outside of financial crises, many investors favor Monday for stock purchases—a phenomenon known as the Monday effect or weekend effect. Some traders theorize that stock prices decline on Mondays due to negative weekend news releases.
Others attribute Monday weakness to investor pessimism about returning to work. Regardless of the underlying cause, the Monday effect has largely faded—in 2018, Monday averaged negative S&P 500 returns, but the impact was minimal.
Nevertheless, if you’re investing in individual stocks, Monday purchases might occasionally yield bargain prices compared to other weekdays.
Conclusion: Best Month to Buy Stocks
While market timing presents challenges, understanding historically strong months can inform investment decisions. If you’re seeking optimal investment timing, April, October, November, December, and January have historically delivered the strongest S&P 500 performance.
Remember that economic conditions and government fiscal and monetary policies significantly influence optimal stock purchase timing throughout the calendar year. Seasonal factors—including retail sales cycles, summer commodity harvests, and pre-Christmas trading activity—also impact market timing decisions.
Need additional investment guidance? Discover how to identify and grow stocks and explore different types of mutual funds.
