The MOST WONDERFUL TIME OF THE YEAR to invest!

Most investors have heard of the "January effect" or "triple witching" day but there's little mention of the last day of the year, THE MOST WONDEFUL TIME OF THE YEAR to invest in the stock market! 

Next Thursday 12/31/2020 at 4 PM, funds, stocks and everything else will close on the last day of the year and a new "bogey", target or gauge for performance will be set for every investor. Money managers are laser focused on getting the highest one year, three year, five year, ten year and (for the young at heart) twenty year returns for their funds.

The 20 Year Indexes chart below shows the 20 year continuously compounded gains for the major investment indexes starting at 1000 on the close  of 12/31/1999-the beginning of the new millennium. One would guess that the Russell 2000 index would be the way to go!

S&P 500 = S&P 500 Stock Index

NASDAQ = NASDAQ Composite Stock Index

RU2000 = Russell 2000 Stock Index

BCOM = Bloomberg Commodity Index 

The one year 2020 chart tells a different story.

The NASDAQ index was the top performer again this year, while everything else, except commodities, again, were all competitive. Different time periods create different winners. IMHO the S&P 500 index is the ideal long term index for nearly all investors.

The continuously compounded rolling returns show this clearly:

Source: Yahoo Finance, Bloomberg as of the close Tursday, 12/24/2020

The moral of the story is that the index you buy doesn't matter all that much as long as you buy and hold for the long term. Take your pick and, excepting the commodity index, get your decent long-term gains!

Feel free to post comments.

Disclaimer: Posts are for education only and not investment advice, may be subject to change without notice, and, while prepared with care, may be subject to omissions and errors.