From minute to minute, the stock market is affected by a lot of different things. This includes, among other things, information about inflation, the gross domestic product (GDP), interest rates, unemployment, supply, demand, political changes, and larger economic forces.
Some general market trends that have been around for a long time make this more difficult. Like their share-price-based counterparts, these stock market oddities may give investors a chance to buy. Among these oddities are:
Regularities based on prices:
- Smaller companies usually do better than bigger ones, which is one of the main reasons to buy small cap stocks.
- Stocks with lower prices tend to do better than stocks with higher prices, and the value of a company tends to go up after a stock split.
3, Companies usually only change their prices in the short-term and long-term.
- Tax-loss selling hurts companies with low stock prices in December and helps them recover in January.
Regularities based on the calendar:
Because of these patterns, you can better time your short-term investments. Even though investors should remember that over the long term, the benefits of a regular investment plan (like investing every month) far outweigh the benefits of trying to time their investments by a day or two, the following patterns have been shown to happen.
- Effect of the day of the week. Stock markets tend to be weak at the beginning of the week and strong at the end of the week.
- The effect of the time of day. The return and volatility of the stock market are different at the beginning and end of the day.
- Effect of the week of the month. Most of the money made on the stock market comes in during the first two weeks of the month.
- Effect of the month of the year. Most of the time, the first month of the year brings in more money than the rest of the year. The January effect is the name for this.
Investors should remember that not every anomaly happens every time, but being aware of them will help you make money in the long run and deal with short-term market volatility. In short, use these differences to your advantage, but don't let them get in the way of your long-term investment goals.
