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Client Question: How do you invest a new account?

We take our time with new clients’ money. Some firms may invest all the money immediately because they counsel against trying to time the market but depending on the market situation, we believe that some prudence is required. Usually ½ positions are purchased in equities, with the remaining 50% allocated depending on what happens later in the market.

According to Lu Wang of Bloomberg News on October 1, 2017: “Theories abound as to why the fourth quarter is so often the best one for equity bulls. Fund managers need to catch up, holiday spending spreads cheer, investors celebrate the January effect in December. Or maybe it’s just dumb luck. Whatever the case, the S&P 500 Index has risen seven times in the last eight years between October and December. And while calendar effects just took a beating with a volatility-free September, betting against any form of momentum remains a losing trade until proven otherwise.”

Also, as noted above, calendar returns from October to October rather than January to December tend to be above-average, especially among the small-cap stocks. Looking at our global stock holdings, the average growth rate from October to October since 1990 has been around 21%. This compares to the index averages of 8%. We believe that is a significant number. Does it always grow at this rate if money is added each October? No, the success rate of the past 27 years has been about 75% (18 of 27 years) but the odds do favour the investor.