Is there any point to starting an investment in the summer?
The old investor’s adage of ‘sell in May and go away’ refers to the cyclical trend wherein many markets tend to take a dip in the summer, running up to a recovery that starts around September. Whether this tendency is attributed to investment bankers taking extended holidays, investors pulling holiday spending money out of their portfolios or parents keeping their cash on hand until the kids are back at school may be down to your interpretation, but it does beg a serious question:
If markets have a tendency to recede in the summer, should we be putting off our investment plans for a couple of months?
At Black Swan Capital, we can often sound like a stuck record when it comes to focusing on your targets. Too many investors put all the emphasis on the investment and none on the intended outcome. Consider whether your long-term financial goals will change significantly in the next couple of months. If they will not, then why should you put off working towards them?
Planning for your future is about starting now and staying true to the objective, not trying to pick the right month, week, day, hour or minute to start towards it. Generally, when people use a phrase like “the wrong time of year to invest” it reflects a hesitancy to commit to a strategy. In that case, we need to examine the reasons behind the trepidation.
If you are looking for the perfect time to start investing for the long term, you are already too late. You missed it. The perfect time was yesterday, or the day before, or last year… you get the picture. Have a read of our previous article about ‘The Second Best Time to Invest’ for more on this subject. In all likelihood, you will spend forever waiting for that perfect opportunity in the markets, and then when you finally think you have found the ideal moment, you will be disappointed that you didn’t make the decision earlier.
If you honestly believe that your goals are going to change significantly in the next couple of months, then this is a valid reason not to overcommit to any kind of inflexible strategy, but also a good reason to work with your financial advisor on identifying what those new goals may be and how you can build extra flexibility into your plans to accommodate any changes that might occur.
If neither of the above applies in your case, I would hazard a guess that there is something about investing right now that is making you uncomfortable, whether because a financial plan has been presented to you by a professional and you are unsure about it, or because changing your relationship with money and investing right now takes you out of your comfort zone. In this case look at a FACT analysis of the financial plan you are about to put in place and figure out what is making you want to delay.
Any investment for an individual should fill these four criteria:
Flexibility – you should have an appropriate amount of flexibility for your needs.
Affordability – never starve yourself today to feed yourself tomorrow.
Clarity – you should understand the structure and terms of any investment.
Targeting – the investment should be based on the destination, not the journey.
If one of these isn’t right for you, you will be putting it off until it’s way too late to achieve your goals, so figure out which one is not quite right and why. Speak to your financial advisor about how to remedy the situation so that you can get your plans back on track as soon as possible.
Ultimately, you are faced with a trade-off between starting towards your goals today, and the possibility that this will be one of the trend-following years where market growth is a little stunted during the summer months, or holding off on your goals until later in the year, and running the risk that you have less time, less experience and less momentum in your journey to achieve them.
Ignore the calendar right now. Think of where you need to be at the other end of this timeline.