One interesting anomaly that has shown to provide consistent outperformance over the last 20 years is what is known as the six month strategy. My own research, and countless academic papers, has shown that simply reviewing your portfolio every six months massively enhances your investment returns. Buy and hold is for the lazy and those not concerned with maximising their returns.
But the winter strategy states that you make better returns if you invest on 1st November and then sell out of the market on 30th April the following year, than if you remain invested all year round.
According to data compiled by Harriman House, publisher of The UK Stock Market Almanac, £100 invested in the FTSE All-Share Index continuously since 1995 would have grown to £231 (excluding dividends). However, if they had followed the six-month strategy, that £100 would be worth significantly more - £294. If they had chosen only to invest over the summer months and stayed in cash over the winter, they would have lost money and their £100 would be worth just £78.
Over 10 years, the results are slightly less pronounced, but confirm the trend and investing throughout the whole time period would see £100 turn into £151, compared to £155 if just the winter months had been chosen. A summer-only portfolio would have shrunk to £98.(source: Interactive Investor)
The analyst who conducted the research claims this trend can be traced back to the 19th Century in most developed markets. The reasoning behind the trend is that more money flows into the market during the winter months plus retail investors tend to close out positions in April due to tax reasons. However, to my mind this trend is an extension to the 'Sell in May and go away and come back on St Leger Day' mantra. Yet a slightly more concentrated version. The problem with the 'Sell in May' idea is that it doesn't outperform every year, and the Winter portfolio will be no different.
What should you buy for the winter?
As my own research has shown, along with the thousands of academic papers on the subject, using a momentum style investment strategy and you review your selections massively boosts your returns. Over the long term it can mean as much as x% more a year over the market.
80-20 Investor's algorithm takes this one stage further by risk adjusting the process, and by that I mean taking into account how the fund has performed not just what it has returned. This again increases returns and reduces the downside risks. So what would I be buying on 1st November?
Based on our 'Best of the Best selection' as at 1st November then the following would be likely candidates:
| Name | Sector |
| First State - Asia Pacific | Asia Pacific Excluding Japan |
| First State - Asia Pacific Sustainability | Asia Pacific Excluding Japan |
| Henderson - China Opportunities | China/Greater China |
| Fundsmith - Equity R | Global |
| Investec - Global Bond A Inc GBP | Global Bonds |
| L&G - Emerging Markets Government Bond (US$) Index I | Global Emerging Market Bond |
| M&G - Emerging Markets Bond A | Global Emerging Market Bond |
| Standard Life Investments - Emerging Market Debt Ret | Global Emerging Market Bond |
| Henderson - Emerging Markets Opportunities | Global Emerging Markets |
| Aviva Inv - Global Equity Income | Global Equity Income |
| Fidelity - Global Dividend | Global Equity Income |
| Aberdeen - Japan Equity | Japan |
| Vanguard - LifeStrategy 20% Equity | Mixed Investment 0%-35% Shares |
| Henderson - US Growth | North America |
| Fidelity - Global Property | Property |
| First State - Global Property Securities | Property |
| M&G - Global Real Estate Securities | Property |
| Invesco Perpetual - High Yield | Sterling High Yield |
| Kames - High Yield Bond | Sterling High Yield |
| CF - IM Bond | Sterling Strategic Bond |
| Schroder - Charity Fixed Interest | Sterling Strategic Bond |
| AXA - Framlington Global Technology | Technology & Telecoms |
| L&G - Global Technology Index | Technology & Telecoms |
| Newton - UK Equity | UK All Companies |
| L&G - All Stocks Index Linked Gilt Index | UK Index - Linked Gilts |
(image by Serge Bertasius Photography, freedigitalphotos.net)
