Right at the beginning of the month? In the middle? At the end of the month? Or does it not matter in the long term on which day investors buy shares or have their savings plan executed? Pascal Kielkopf did the maths and came to a clear conclusion.
The capital market analyst from HQ Trust analysed the average daily returns of equity indices such as the MSCI ACWI, the German benchmark index DAX and the US S&P 500 index. As the same pattern could be observed for these stock market barometers, the presentation is limited to the market-wide, global equity index MSCI ACWI. Pascal Kielkopf’s analysis covers the period from January 1972 to May 2024.
– ‘On average, the MSCI ACWI has risen by 0.8% per month since 1972.’
– ‘If you look at an average month, this “model month” consists of three phases.’
– ‘At the beginning of the “sample month”, prices rise. Towards the middle of the month there is a slight downward trend, after which prices rise again.’
Pascal Kielkopf offers a possible explanation for the weakness shortly after the middle of the month:
– ‘Most important economic data such as inflation or unemployment figures are published in the first and last days of a month. This also applies to many company figures.’
– ‘The period shortly after the middle of the month, on the other hand, is usually somewhat less news-rich, which could be used by investors to take profits.’
– ‘This is also when the futures markets regularly expire. Shortly after the so-called ‘Triple Witching Day‘, many traders adjust their positions, which often leads to increased volatility.’
What should investors do?
– ‘In theory, an investor who was always invested from the 25th of a month to the 18th of the following month would have done best.’
– ‘On average, his return would have been 0.9 % per month. What sounds like a marginal difference would have made a significant difference in the long term.’
– ‘However, investors should not forget transaction costs and taxes in this analysis – and above all the fact that it is only a sample month and all periods are different in reality.’
– ‘Investors should therefore execute their savings plans when the money is available. For example, shortly after they have received their salary or pension. Regardless of whether this is the beginning, middle or end of the month.’
– ‘Waiting several days or weeks before doing so will cost more in returns than it brings – and such timing also contradicts the long-term nature of a savings plan.’
