Which is the most profitable day of the year to invest on?

The Day You Invest: Does it Really Matter?

We’ve all heard the old stock market adages: "Sell in May and go away" or warnings of how September is one of the weakest months for many stock markets. But if you are investing for the long-term, do such short-term stock market moves really impact your returns over the long run? Taking that thought one stage further, is there a day of the year on which it is statistically more profitable to start investing? What about the worst day?

To find the answers to these questions, I analysed the performance of the FTSE 100 over every possible five-year timeframe since its inception in December 1983. I analysed over 10,000 data points to calculate what happened if you had invested in the FTSE 100 on each day of the year and sold out five years later (for example, investing on 1st January 1984 and selling on 1st January 1989).

I then used that data to calculate the average return for every day of the year. This allowed me to not only calculate the average rise in the FTSE 100 Index (ignoring dividends) for any given day but also to pick out the best and worst days of the year to invest.

The best and worst days of the year to invest

First, I calculated the average return for the FTSE 100 over any given five-year period as 28.90%. This gives the following figures some context.

The 20 best days to invest

The best day to invest is 3rd January, which is often the first trading day of the New Year. In fact, five of the top ten days to invest are between Christmas and 10th January.

Day	% average rise in FTSE 100 Index over next 5 yrs
03-Jan	33.44
27-Dec	33.26
19-Jul	33.20
12-Jul	32.98
10-Jan	32.93
28-Feb	32.90
31-Jan	32.76
17-Jan	32.71
02-Jan	32.67
09-Jan	32.66
24-Jan	32.62
26-Jul	32.61
16-Jan	32.58
28-Jun	32.48
27-May	32.46
01-Jan	32.38
07-Feb	32.37
15-Jul	32.32
23-Jan	32.30
14-Feb	32.27

 

The worst days of the year to invest

The worst days are heavily clustered around the autumn, particularly September and October.

Day	% average rise in FTSE 100 Index over next 5 yrs
16-Jun	26.84
21-Jul	26.65
20-Oct	26.63
14-Jul	26.57
11-Aug	26.56
30-Jun	26.32
28-Jul	26.28
23-Jun	26.28
18-Aug	26.26
04-Aug	26.25
15-Dec	25.91
29-Dec	25.85
08-Sep	25.80
01-Sep	25.78
22-Dec	25.56
15-Sep	25.44
29-Sep	25.24
06-Oct	25.01
22-Sep	24.85
13-Oct	24.65

What time of year should you invest to boost returns?

Both tables hint at a trend: the worst days centre around the autumn and the best days around the New Year. To smooth out the noise, I charted the average return for each day using a 14-day moving average (the blue line in the chart below). The red line represents the average rise in the FTSE 100 for any given 5-year period. So if the blue line is above the red line it means that it has been more profitable to invest during that period.

The analysis shows:

• The most profitable time to invest is between December and March.
• July is also surprisingly profitable.
• Autumn is historically the worst time to invest.

So why the variations? I think there is a likely rational explanation. For example, December often sees a Santa Rally (read my article Will there be a Santa Rally this year?) where the stock market has a tendency to rally during the trading days between Christmas and the second trading day of January. So perhaps a five year investing timeframe that starts during one Santa rally and ends in another gets a boost from this phenomenon.

Also, January to March is the peak of Stocks and Shares ISA sales. So this increase in demand is likely to have a knock-on effect within the stock market. If more people buy into the market the price of the FTSE 100 could be supported. For the same reason perhaps that is why we see another positive period when the new tax year starts, as a wave of investors put money to work via ISAs in the new tax year. If the overriding trend is a reflection of investor demand perhaps July is the pre-holiday rush as people sort their finances before enjoying some sun.

The autumn weakness may be a result of starting and ending an investment timeframe around September, a notoriously weak month for stock market returns.

While these statistical trends offer a fascinating glimpse into historical market cycles, they are not a guarantee of future results. The "New Year effect" or "autumn weakness" observed over the last 40 years could easily be disrupted by unforeseen global events, shifts in monetary policy, or changes in investor behaviour.

Furthermore, this analysis focuses strictly on the FTSE 100 Index price and ignores the impact of dividends. Plus, I only focus on five-year investment timeframes. Yet even in a five-year window, reinvested dividends can account for a substantial portion of total returns.

Despite these caveats, the data provides a compelling narrative. While "time in the market" is one of the most important factors for success, the research shows that, historically speaking, we are now entering a favourable window to put money to work.