Around this time of year you hear a lot of talk about the January Effect, which supposedly causes the stock market to traditionally have good months in January. The idea is that people have sold off many of their positions at the end of the previous year for tax reasons, which both drives down the prices of those stocks, and drives up the prices of the stocks they buy when they get back into the market in January.
There's even research behind this. Between 1940 and 1974, researchers found, stocks went up in January an average of five times more than they did in the average month. That's something worth hopping onto, isn't it?
Except that right around the time people began recognizing this January Effect, it started to dissipate. The market tends to adapt to any sort of anomalies very quickly. Both 2008 and 2009, for instance, had weak Januaries.
The larger problem is that it's wrong as a tactical move. People who invest in the stock market for a month at a time generally don't fare nearly as well as those who are in for the long term.
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