ITA Wealth Management

Have you ever heard of the “Halloween Effect?”  The basics of this market timing strategy are the following.  Be fully invested in the market after Halloween and stay invested for six months.  Then exit the market and remain in cash over the summer and early fall months.  This strategy is explained in Sy Harding’s book, “Riding the Bear: How to Prosper in the Coming Bear Market.” My copy has a copyright date of 1999.  Let that date and the title of Harding’s book settle into your brain for a few moments.

Harding calls the Halloween Effect his Seasonal Timing System (STS).  In his book he produces thirty-five years of data and here are the conclusions. “An investment of $100,000 would have grown to $7,872,000, whereas a buy and hold strategy would have turned $100,000 into only $4,252,000.  Yes, most of us would be happy with the four million.

Here is another interesting point to the STS. “The worst “drawdown” suffered by the Seasonal Timing System was 5 percent in 1984.  Tht compares to the eleven serious corrections or ear markets encountered by the DJIA on a buy and hold basis during the period, with declines as large as 45 percent, and averaging 26 percent.”

I think Harding had his clients out of the October/November bear market.

Harding has these five rules and they are more specific than the general rule given above.

1. Buy a good legible calendar.
2. Sell on the fourth trading day of May and go away!  Forget the market!  Travel. Play golf.
3. Come back in October.  Reenter on the day before the last trading day of the month.
4. Forget the market again.  Don’t watch it.  Don’t fret about its gyrations.  Enjoy Thanksgiving, Christmas, New Years.  Go skiing.
5. Come back in April  Repeat Steps 2 through 4.

The above five rules are found on page 74 of Harding’s book.

But these five rules are not the end of the story.  More details of how to fine tune these basic rules will be amplified over time within the Premium Content side of the blog.

Premium subscription is available for $6.99 per month.

Lowell Herr

Photograph:  Longboat Key near Sarasoto, FL