The Motley Fool Discussion Boards

Previous Page

Investing/Strategies / Mechanical Investing


Subject:  Re: Cash alternatives in a retirement account Date:  2/24/2014  9:49 AM
Author:  Rayvt Number:  248736 of 271064

the January effect.

Sorry, one last thing I forget:

#7: the January effect is not actionable.
How would you use this indicator? I don't see how. So it seems to me to just be something for writers & talking heads to write & talk about.

What could you do with this indicator?
Wait until the end of January and then either stay in cash through December, or buy stocks? Q: Which stocks? The whole market -- SPY, VTI, etc.? Or individual stocks or sectors? AFAIK the Jan Effect studies have been on whole market, so we don't know if it says any predicion about individual stocks/sectors.

So, at end of Dec ... Jan 1st is here. What do you do for Jan? Continue your current positioning? Go full-out into stocks?

In a typical investing lifetime, you only have 30-35 January months -- and probably only the last 10 have a significant amount of money in your investment portfolio.

The way you make money in the market is like a casino -- have an edge and crank it over and over agsin, so that the edge has the opportunity to work for you. That means hundreds or thousands of times, not just a handful of times.

With only 30-35 opportunities (but realistically only the last 10-12 make any difference), there are just too few chances for your edge to play out.

* Questionable indicator.
* Not actionable.
* The signals are too infrequent.
Copyright 1996-2018 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us