Can investing with the seasons make a difference to your returns

Top Quote James Man and Michael Hoffman, Senior Portfolio Managers at Ling Capital in Tokyo, Japan, discuss whether seasonal investing could really improve your portfolio. End Quote
  • (1888PressRelease) November 12, 2015 - Experts often talk about the cyclical nature of markets and try to identify the beginnings of bear and bull periods. But could the reality be much simpler?

    Analysis suggests that investors who buy shares at the start of November and sell at the end of April are significantly more successful than those who only invest in the warmer months.

    In fact, winter investors would have seen a rise of 216 per cent over the past 20 years had they bought and sold every November and April, while summer investors would have lost 31 per cent. That's a difference of turning $100 into $216 compared to seeing it dwindle to just $69.

    Investing during the colder half of the year made investors more money than those who invested for a whole year. Those investors saw a 100 per cent rise to $200 for every $100 invested, excluding dividends.

    Investing continually over the 10 years, the difference in returns is still marked. Investing throughout the whole time period would transform your $100 into $130. That's compared to $166 if you opted for winter investing, and $85 if you invested during the summer months.

    James Man, Senior Portfolio Manager at Ling Capital said 'The Winter Portfolio leverages off two phenomena. The first is the feature of shares generally performing better over the winter (November to April) than over the summer (May to October). The second is the identification of certain shares that consistently out-perform the market in the winter period. These two features together can be used to create a turbo-charged portfolio.'

    Michael Hoffman, Senior Portfolio Manager at Ling, who compiled the research, said: 'Year after year, the data suggests investing over the winter months is far more favourable than investing over the summer, or, indeed, remaining fully-invested all year round.

    'Between November and April, stocks are less volatile, sentiment is more positive, the weight of liquidity is strong and hence the performance versus the rest of the year is unmatched, either in risk-adjusted or absolute terms.'

    'There are no conclusive studies on this subject, but one explanation is that far more money flows into the market over the winter months as investors take advantage of tax-efficient products in the run up to global tax year ends. This liquidity provides a strong foundation for global equity markets.'

    Some investment groups are so convinced the phenomenon is genuine that last year they created two winter portfolios - 'Aggressive' and 'Cautious'. They contain 'high-beta stocks' that typically perform even better over the winter months than the market average.

    The 'Aggressive' portfolio returned 16.9 per cent, and the 'Cautious' 14 per cent, both beating the 8.7 per cent rise of the FTSE 350 index.

    James Man followed up with "While there was something to seasonal investment, it worked better in theory than in practice. Studies show that if you invest now until April, stocks do well because they typically have not done well in October. You will also have Isa money in the final months of the tax year coming in which can give a boost to markets that way. The statistics may say you will do better, but some analysts still believe you are much more likely to get a better return hedging your money long-term, say over five years."

    Ling Capital is an asset management firm based in Tokyo, Japan, and has been operating its private client division since 2011. For any further information please visit or email info ( @ ) lingcapital dot com. Alternatively, contact us on +(00)813-4520-9594.

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