Did you know that Monday is the worst possible day to own Singapore shares? No, I am not making this up. The findings are the result of some serious data mining by a group of researchers in Sweden. But that is not all the academics unearthed. They also found that the worst months to be exposed to Singapore shares are January, May, August and September. The Swedish researchers concluded that investors could vastly improve their overall returns if they avoid holding Singapore shares in their portfolios on Mondays and also during the months of January, May, August and September….
No, I am not making this up. The findings are the result of some serious data mining by a group of researchers in Sweden. But that is not all the academics unearthed. They also found that the worst months to be exposed to Singapore shares are January, May, August and September.
The Swedish researchers concluded that investors could vastly improve their overall returns if they avoid holding Singapore shares in their portfolios on Mondays and also during the months of January, May, August and September.
I don’t like Monday (or Tuesdays)
But before you ditch your shares come Monday morning, I should point out that separate research showed that Tuesdays are not that great for holding Singapore shares either. So it would seem that the first two days of the working week are not ideal for us Singapore investors.
The thing to note, though, is that the research was carried out using the Straits Times Index (SGX: ^STI) rather than individual share. What’s more, transaction costs were not included in the calculations. That could put a totally different complexion on things because trading costs and dividends are important considerations when calculating total returns.
But regardless of the costs, for me the idea of buying and selling shares based on calendar effects just does not make sense. And I am not alone in thinking that.
Warren Buffett once said: “Since the basic game [of investing] is so favourable, Charlie [Munger] and I believe it’s a terrible mistake to dance in and out of it based on the turn of tarot cards.”
He went on to say: “My own history provides a dramatic example – I made my first stock purchase in the spring of 1942 when the U.S. was suffering major losses throughout the Pacific war zone. Each day’s headlines told of more setbacks. Even so, there was no talk about uncertainty; every American I knew believed we would prevail.”
Buffett is right on the money
Warren Buffett is spot on. There are few things in investing that are more pointless than trying to second-guess what the market may or may not do. Nevertheless, it is a common trap that many private investors fall into time and time again.
To underline the point, Buffett details the performance of the S&P 500 since 1965. The important thing to note is that neither he nor the market has been profitable every single year. The S&P 500 has delivered a negative return in ten of the last 47 years. Meanwhile, Buffett’s Berkshire Hathaway has been unprofitable – as reflected by a negative book value – in two of the last 47 years.
But – and here is the big ‘but’ – the S&P has delivered a total gain of 7,433%, which equates to a total return of 9.4% a year over the last 47 years. Put another way, $1,000 invested in the US market in 1965 would be worth over $75,000 today.
And here’s another thing – Buffett has outperformed the market by a significant margin. His return over the same period was 19.7% a year, which translates to an overall gain of 586,817%. In other words, $1,000 invested in his Berkshire Hathaway investment vehicle in 1965 would be worth around $5.8 million today.
For me there are a couple of important takeaways.
The first is that regular passive investing through a low-cost stock market index tracker, such as the SPDR Straits Times Index ETF (SGX: ES3), could deliver inflation-beating returns over the long term for us Singapore investors. But it is important to resist the temptation of trying to predict what the market may do.
The second takeaway, which is probably more important, is that judiciously picking a handful of shares could help outperform not only inflation but the wider market too. That requires a bit more effort but it is something that we enjoy doing here at The Motley Fool.
This article first appeared in Take Stock Singapore.
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