We are sure seeing a shaky start to the stock market this new year. I heard something on a news station the other night that talked about the January Effect. The simple explanation of the January Effect is, "as goes January, so goes the year." In other words, the performance of January is a good indicator of how the year will turn out.
After hearing this on the news I wanted to know more about this statement and what other stock market professionals thought. It appears that there are a varying degree of thoughts. Some believe the statement because historical performance goes inline with the January Effect. While others say that past performance can be no guarantee of future performance.
Whether you take the January Effect as your barometer for the year or not each sentiment has its fair share of stats to "prove" why you should or shouldn't take the January Effect as your barometer to gauge the performance for the rest of the year.
Here are two basic stats to give you an idea of what I am talking about. Using the S&P 500 index and going back to 1951 we calculate that in 75% of years, the return, whether positive or negative mirrored the return of January. So if January was up 75% of the time the year was up and when January was down 75% of the time the year was down. That is some great historical data to "prove" that you might want to take the January Effect into consideration.
So how is the S&P shaking out so far for January? As of mid-day 1/9/2015 it is in the red at -.58. If this pattern continues throughout the month we are most likely going to see a down year. The bigger the fall for January the more likely the fall for the year.
What does this mean for investing in 2015? If you are skeptical about the future for this year and are trying to do things that will help your retirement portfolio I have a couple of great options that you may want to look at.
Many investment professionals would suggest that one great way to help you stay competitive and safe through an iffy market would be to have a portfolio that is diversified. This is a suggested tactic by many investment professionals no matter what type of market we are currently in. I totally agree with a diversified portfolio.
There are plenty of ways investment professionals can help you get a diversified portfolio but I like the idea of diversifying outside of the stock markets with my IRA and 401k. Investing in some real tangible hard assets. Some of the tangible assets I am talking about are real estate or some type of precious metals like gold or silver. In order to invest in a real estate property or even gold or silver you have to have a self-directed IRA. Self-directed IRAs are the same thing as a regular IRA but with one difference. The difference is that the custodian (investment firm) allows for alternative investments into things like real estate, gold, private placements and much more.
These are the types of things that can truly diversify your retirement portfolio outside of the stock market. I wrote another piece as to why 2015 might be a great year for investing in real estate. Check it out and learn more about what we can do for you and your retirement investing.
We can help you invest in the things you have always wanted to invest in all while getting the tax advantages of an IRA or 401k.
Author: Nick Barker