While kids all across the world anxiously await Santa's arrival on Christmas, many investors will be looking to the week between Christmas and New Year’s as a time of giving to their portfolio.
The Santa Rally is a term used for a time when stock markets gain ground in December, whether due to heavier retail sales or investors looking to pad their portfolio in hopes of bigger gains in the coming year. We have seen its effect in 16 of the last 20 years in the DJIA and SP500.
Will Santa be kind to us again this year? While the numbers look good on paper, let’s not forget the fundamentals of investing.
Investing is about the long haul. Individuals willing to take the risks inherent in the market are those able to take advantage of the gains when they occur. However these things take time, patience and an understanding that just because an event has occurred multiple times in the past, it does not mean that it will necessarily happen again.
That is the beauty of the stock market – its complete unpredictability.
That is also why the stock market may not be for everyone. If you don't have the time to wait for your portfolio to return from an unexpected loss, than maybe you should look for other investments.
So while the "Santa Rally" sells airtime and is a nice buzz word for TV, it is not a strategy for long-term investing. For some, sticking to the fundamentals, managing risk and reducing your tax liability may be the best long term investment plan.
To read about Black Friday and Turkey Day sales, click here.
For more on the Santa Rally, click here, or for the history of the Santa Rally, click here.
Joe Wirbick is the president of the Lancaster, PA financial services firm Sequinox. Joe specializes in retirement planning and distribution. This allows him to concentrate on developing strategies that help address the unique issues that confront retirees and those approaching retirement.
Tax information is provided for informational purposes only, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation.. Tax returns should be completed in conjunction with a qualified tax professional. While we are familiar with the tax provisions of the issues presented herein, Sequinox Financial and JWC/JWCA do not offer tax advice and are not affiliated. Mr. Wirbick is an Investment Advisor Representative offering advisory services through J.W. Cole Financial Advisors, Inc.. (JWCA) and securities through J.W. Cole Financial, Inc. (JWC) Member FINRA/SIPC. The opinions expressed are those of Mr. Wirbick and based on information believed to be reliable but not guaranteed and subject to change and do not necessarily reflect the position of JWC/JWCA.JWC/JWCA and Sequinox are unaffiliated independent entities.