Quick Look
Let me cut the fluff: historically, the best months to buy stocks are November through April. That's the period when the S&P 500 has delivered the bulk of its gains over the past 90+ years. But if you think you can just set a reminder to buy in November and sell in May, you're in for a rude awakening. I've been trading for over a decade, and I've watched people lose money trying to game seasonal patterns the wrong way. Let me walk you through what actually works—and what doesn't.
The Big Picture: Seasonal Effects That Matter
Most investors have heard of the “Sell in May and Go Away” strategy. The idea is simple: exit the market in early May and re-enter in November. Historically, the six months from November to April have significantly outperformed the May–October period. According to data from the Stock Trader's Almanac, since 1950, the Dow Jones Industrial Average has gained an average of about 7% during the November–April stretch, compared to only about 1% during May–October. That's a huge difference.
But here's where it gets tricky: those averages mask a lot of volatility. Some of the biggest bull runs started in May (hello, 2009). And some of the worst crashes happened in November (2008). So while the seasonal trend is real, it's not a signal to blindly follow the calendar. I learned this the hard way back in 2013 when I sold everything in May and missed a 6% rally in June.
Month-by-Month Average Returns (S&P 500)
To give you a clearer picture, I pulled the average monthly returns for the S&P 500 from 1928 to 2022. The data comes from a study by Yardeni Research. Check out the table below—it shows the mean return for each month. Keep in mind, these are long-term averages, not guarantees.
| Month | Avg Return (%) | Frequency of Positive Returns |
|---|---|---|
| January | +1.0% | 60% |
| February | +0.1% | 54% |
| March | +1.1% | 61% |
| April | +1.4% | 65% |
| May | +0.1% | 53% |
| June | +0.3% | 56% |
| July | +1.2% | 61% |
| August | +0.1% | 52% |
| September | -0.7% | 44% |
| October | +0.5% | 55% |
| November | +1.5% | 65% |
| December | +1.4% | 66% |
The table confirms the story: September is the ugliest month, with an average loss of 0.7%. It's the only month with a negative average. On the flip side, November and December stand out as the strongest, with average gains above 1.4%. April and July also shine. So if you're looking for the best months to buy, November, December, April, and July are your historical sweet spots.
Why the Best Months Aren't Always the Best
I once had a friend who waited until November to invest his entire bonus. He'd read about the “November effect” and thought he was being smart. But in November of that year, the market dropped 5% on trade war fears. He panicked and sold in December. Classic mistake.
The truth is, seasonal patterns work best when combined with other factors—valuation, economic data, and momentum. Simply buying in certain months without considering the broader context is a recipe for frustration. For example, if the market has already rallied 20% from January to October, buying in November might mean buying near a top. On the other hand, if the market has been crushed in September and October, November often marks a turning point.
Personally, I use a filter: I only overweight the seasonal best months if the market is not in a bear market, and if the 200-day moving average is sloping up. That simple rule has saved me from getting caught in the 2008 November decline. Not everyone talks about this because it's not as catchy as “Sell in May.” But it's more profitable.
How to Use Seasonal Patterns Without Getting Burned
Here's my step-by-step approach, developed over thousands of trades:
- Check the calendar for potential entry windows: Historically, late October to early November is a strong entry zone. Also, late December (the so-called Santa Claus rally) and early April.
- Look for a pullback within the favorable month: Don't just buy on day one. Wait for a 3-5% dip. In November, for example, there's often a post-election or mid-month weakness.
- Combine with a trend filter: If the S&P 500 is above its 200-day moving average, the seasonal pattern is more reliable. If it's below, wait.
- Always have an exit plan: If you're following “Sell in May,” don't sell on the first trading day of May. Use technical signals like a breakdown below the 50-day moving average to exit.
I remember one year I bought a basket of tech stocks in late October after a 8% correction. By January, I was up 15%. That worked because I combined seasonal timing with a dip-buying strategy. Pure calendar trading would have made me buy at the peak in early October.
FAQ
This article draws on data from the Stock Trader's Almanac and Yardeni Research. Patterns are historical; past performance does not guarantee future results. Always do your own research.
