This strategy for investing in ASX shares has an 82% success rate

This tactic is pretty easy to do, but it has a phenomenal strike rate. Even in bad years for the stock market, it can ease the pain somewhat.

| More on:
Man puts hands in the air and cheers with head back while holding phone and coffee

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The old investment adage of "buy low, sell high" is an odd concept.

Most experts will tell you timing the market is fraught with danger. No one, professional or amateur, has a crystal ball.

So how are you supposed to buy low and sell high when you don't ever truly know when the S&P/ASX 200 Index (ASX: XJO) is "low" and "high"?

With that caveat in mind, it is still interesting to see historical patterns in market movements.

January to April seems to be a golden period for shares

There is the famous Santa Rally, which sees ASX shares go up in December more often than not.

But prominent Bell Potter adviser Richard Coppleson has dug up another interesting ASX 200 trend that is especially relevant right now.

"Over the last 29 years, one of the best buying opportunities has been to buy during the sell-off that the market has most Januarys and holding for 3.5 months until the end of April," he posted on Livewire.

"This strategy has had a phenomenal winning success rate of 82%."

Out of the 29 years, this philosophy has seen positive returns 24 times.

The average return over just those 3.5 months has been a huge 5.75%. Before the March 2020 COVID-19 crash, that average was running at 6.57%.

"Considering the average gain in the ASX 200 each year over 12 months since 1993 has been +6.56%, this is significant," said Coppleson.

"While the 24 times it was UP the return was a massive +7.8%."

Even in bad years, this strategy can help

Remarkably, even in the 8 years that the ASX 200 lost money for investors, the January to April strategy mostly performed better than the yearly return.

Those 8 years saw an average of 0.34% positive return for Coppleson's 3.5-month tactic, while the yearly losses averaged 11.64%.

"Every year bar just one — 2020 where COVID stuffed it all up — all the others OUTPERFORMED significantly… by a massive margin vs where the market closed for that year."

This is all to say historically it seems to be wise to be fully invested in ASX shares during the first few months of the year.

"If you are worried about the year then reducing net long positions at the end of April can be a very good strategy."

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Investing Strategies

Ecstatic woman looking at her phone outside with her fist pumped.
Share Market News

This ASX dividend stock could be primed for a rebound

This ASX lottery tech stock could offer both income and capital growth for savvy investors.

Read more »

Young woman thinking with laptop open.
Dividend Investing

At $4.95, here's the dividend yield you'll get from Telstra shares today

Telstra shares have rocketed, but its dividend yield has gone the other way...

Read more »

Young woman waiting for job interview.
Growth Shares

Australian job ad volumes declined last month. Are Seek shares a sell?

Should investors seek returns elsewhere?

Read more »

A man smiles as he holds bank notes in front of a laptop.
Dividend Investing

2 compelling ASX dividend shares with yields above 6%

Here are two stocks with yields so good you shouldn’t ignore them.

Read more »

Happy young couple saving money in piggy bank.
Dividend Investing

How I'd invest $50,000 in ASX dividend stocks to never worry about money again

Let's have a look at a potential income portfolio that could deliver the goods over the long term.

Read more »

A man and woman sit at a desk staring intently at a laptop screen with papers next to them.
Dividend Investing

Overinvested in Fortescue shares? Here are two alternative ASX dividend stocks

Fortescue may not shower investors with dividends in the coming years.

Read more »

a man sits back from his laptop computer with both hands behind his head feeling happy to see the Brambles share price moving significantly higher today
Industrials Shares

3 reasons to buy this surging ASX 200 stock today

A leading expert forecasts more outperformance from this fast-rising ASX 200 dividend stock.

Read more »

Two university students in the library, one in a wheelchair, log in for the first time with the help of a lecturer.
Blue Chip Shares

2 strong blue chip ASX 200 shares to buy with $20,000

Let's see why analysts think these top stocks could be buys.

Read more »