As the calendar flips a page this week, look for investors to buy stocks. If March 1 follows recent history, the first trading day of the month will be profitable for investors.
Over the past two years, buyers headed to the stock market on the first day of a month three-quarters of the time. All those first-of-the-months together have resulted in double-digit returns for the S&P 500 index.
This week’s first-of-the-month comes with worries about oil prices and stability in the Mid-East, but previous calendar changes have dealt with Greek debt, U.S. elections and military action on the Korean peninsula.
What makes a new month so enticing for stock investors?
The “slow and steady” investment strategy preached to millions of mutual fund and 401(k) investors may be one ingredient. As first-of-the-month paychecks are doled out, that slice reserved for retirement finds its way to the market.
Fidelity Investment finds the average 401(k) balance is at a 10-year high. The same research finds workers have been socking away more than 8 percent of their pay each month for the past two years.
The market trend of higher stock prices on the first day of the month may seem like a simple way and low-risk way to make money. Buying the S&P 500 on the first trading day of the month over the past two years and selling it the next day has returned 14.4 percent. But if you bought two years ago and held on, you’re up more than 55 percent.
Just as one flower bud does not mean spring, a profitable portfolio is not built on one day per month.
But it might help.