Photo courtesy of Michelle Morelos.
I never really believed in Santa Claus. But I know all about him, his reindeers and his sleigh. In financial markets, especially in stocks, investors have, year after year, observed a thing called Santa Claus rally.
That’s when stocks jump higher in between Christmas and New Year’s Day. No matter how tough the year is, there’s a lift in stock prices whether small or big. Nice gift from Santa, don’t you think?
Perhaps it doesn’t really matter why stocks go up during the Christmas season. What matters more is what to do with that rally? Do you grab the chance to sell? If you follow the age-old adage to “buy low and sell high”, it would be best then to avoid at all cost any situation where you have to unload stocks during the Christmas season. Expect this to drag on to January because of what is called “the January effect” when stocks climb even higher in anticipation of more investments from the public. In the next few days in fact, market players expect the PSEi to go higher after Wall Street’s rise last Friday.
It sounds simple enough to understand, but this article from one of my favorite websites — MarketWatch — made me pause and reflect. It says if you have a Christmas windfall, should you really wait for “a good time” to enter the market?
According to writer Jonathan Burton, “timing the market” is really an overrated thing. Something that can only be done successfully year in and year out in someone’s dreams. Meaning, if you have a windfall you would like to invest, put it in the market now and just close your eyes!
I quote:
The odds of hitting exactly the right moment to invest are extremely remote. Repeating this feat year after year borders on fantasy. Mere market mortals have to be satisfied that stocks, while volatile, go up more often than not and over time will add more to a portfolio than bonds or cash.
Maybe true for the US market. I checked and still can’t find any study in the Philippine market that indicates if this is true. For those who have the keys to the truths in local investing, we mere mortals would be delighted if you can share. It can be a good Christmas gift, and we’ll take it gratefully even if it’s not from Santa 
