PWLCapital

Are market returns in January usually higher vs. other months of the year? The so-called January Effect has been discussed in academic literature and the popular press since the 70's. Today on CFRA, Business @ Night host Greg Hebert and I reviewed the January Effect, its possible causes and how individual investors may or may not be able to capture excess January market returns. 
 

Lately, while out on the holiday party circuit, I’ve had a lot of individuals ask for my advice on how best to handle the current market crisis. I generally answer this question by first assessing what type of strategy the individual is presently following. Almost without exception, everyone indicates that they are buy and hold style investors. Having just reviewed the trading volumes of the top ten largest companies that make up the S&P/TSX Composite Index, I wonder if this is in fact true.

Using data provided by TMX Money through the TSX website, I’ve put together the following table that shows how many trading days it takes for all of the publicly floated shares, from the top 10 companies, to completely turnover:

There are approximately 250 trading days on the TSX each year, so every single one of the above companies’ total outstanding shares trades hands at least once per year. This is great news for the companies and individuals that facilitate trading on the TSX and collect transaction fees for their services. If the costs you incur to trade are excessive, history has shown that it will be very difficult for you to even match the market’s overall return let alone beat it. Ideas about where all the buy and hold investors have gone can be posted below.
 

We've all heard the lines "knowledge is power" and "you can never have too much information", but are these notions in fact correct? When you have an important decision to make, is it possible to have too much knowledge?

Today investors, either online or through their advisor, can gain access to huge amounts of investment information and opinions. This data, however, may give them a false confidence that they can accurately pick good stocks. Unfortunately, data related to a task is not always relevant to the task at hand. Suppose you wished to predict the next Lotto 6/49 numbers. Would the review of all previous winning 6/49 combinations be useful in predicting future winning results? What if you discovered that the number 25 had never been drawn in the past? Is 25 more likely to be drawn in the next draw vs. the other 48 numbers? The answer to both questions is no. Each Lotto 6/49 draw is an independent event and is not influenced by previous draws or results.

Similarly the price of a stock today is set by the forces of supply and demand. Supply and demand is determined by information. Today’s stock price is a reflection of all information known today about a company and its underlying stock. The information available today will most likely be markedly different than even 1 month ago, due to the speed of change that can occur in the global economy, company management, product lifecycles, competitor entry or exit, etc… Relying on the billions of bytes of available historical market data gives most investors no more ability to pick individual stocks than to pick the Lotto 6/49 numbers. Yet the first thing most people ask when presented with an investment opportunity is: how has it performed?

Naturally some of your friends and colleagues will succeed at picking winning stocks using historical information, and they will be certain that they knew all along which stocks would be winners. And those who fail will be certain that they too were right, but unlucky - this time.

In his latest video, DFA's David Booth outlines the reasons he feels that investors should remain invested in equity. He outlines three key points in his video:

• Stock valuation metrics are presently very appealing
• Involuntary sellers are creating an opportunity for buyers
• His own intuition about future expected returns

The video is available here. 

Many investors wonder if the U.S. presidential election cycle has a noticeable impact on the financial markets. Last night I discussed this topic with CFRA's Greg Hebert. I covered why a cycle might exist, whether there is an observable cycle in the stock markets and could an investors use this type of knowledge to improve their returns.