We’re in the Worst Month of the Year for Investors — Proceed Sanely

September generally means the lowest average stock returns of the year for investors -- along with the greatest likelihood of a market dive. Here's what you can do about it.

We’re in the Worst Month of the Year for Investors — Proceed Sanely Photo by g-stockstudio / Shutterstock.com

If history is any indication, September will bring investors the worst stock market returns they’ll see all year.

Since 1928, September has had lower average returns than any other month, according to a recent report by LPL Financial. September has also seen more 10 percent drops — technically known as “corrections” — than any other month.

This tendency of large stock market dips to occur in September is why Ryan Detrick, senior market strategist at LPL Financial, calls it “the banana peel month.” He continues:

“Although the economy is still quite strong, this doesn’t mean some usual September volatility is out of the question — in fact, we’d be surprised [if] volatility didn’t pick up given how calm things have been this year.”

If financial prognosticators are any indication, investors should be fearful — if they aren’t already.

“The stage is set for some fireworks in September,” LPL Financial writes. For example, the firm points out that the U.S. Federal Reserve, along with a couple of other countries’ central banking systems, will make interest rate decisions this month.

CNN Money is even gloomier, reporting that “this particular September could wind up being a particularly tough one for investors.”

Why? According to CNN Money:

Increased tension with North Korea could be the catalyst for the market to take a hit. So could any inaction by Washington that leads to a default on U.S. debt payments and/or a government shutdown.

And those are just the political factors. There’s also Hurricane Harvey’s recent devastation and now Hurricane Irma’s potential devastation, CNN adds.

No wonder the publication just reported that its “Fear & Greed Index” is back in “fear” territory, with a score of 43. The index gauges the emotions currently driving the stock market, using a scale of 0 (“extreme fear”) to 100 (“extreme greed”).

What Chicken Littles mean for you

Is the financial sky about to fall? The truth is nobody knows. Even the most astute forecasters are making educated guesses about when the stock market will take its next dive.

Markets can remain overvalued for years, and trying to time the stock market is a fool’s game anyway, as Money Talks News founder Stacy Johnson recently detailed in “The Stock Market’s in Nosebleed Territory — Time to Get Out?” He concludes:

“Even when the next market move looks obvious, it isn’t. And even if you do get out at the top, down the line you’ll be faced with another, equally difficult decision: when to buy back in.”

So there’s no use in freaking out right now. That doesn’t mean you should tune out, though.

Now is a wise time to examine your investments to be sure you’re comfortable with the percentage of your savings that is currently in stocks as opposed to less risky investments. If that percentage makes you uncomfortable, rebalance your investment portfolio. This task is especially important for folks nearing retirement.

Everyone should rebalance their portfolio annually, however, as we advise in “11 Tips for Sane, Successful Stock Investing.” That basically means adjusting the percentages of your money allocated to different types of investments.

For a more detailed explanation, check out “Year-End Review: Evaluate Your Retirement Accounts in 15 Minutes or Less.”

What’s your take on the stock market these days? Let us know by commenting below or on our Facebook page.

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