Historical Best Day of Month to Dollar Cost Average or Invest: UPDATED: 1950 to 2014

Historical Best Day of Month to Dollar Cost Average or Invest: Updated: 1950 to 2014

This article updates the previous "Best Day of Month to Dollar Cost Average".



1. This article now covers February 14, 1950 up to July 8, 2014.



2. The previous article used the Average S&P 500 methodology, which over weighed the S&P 500 when it is large (over 1500), and under weighed the S&P 500 when it was small (around 20 on the S&P 500 in 1950).



3. This article uses the "Percent Above 30 Trading Day Moving Average" methodology.   This way, whether the S&P 500 had a low value or high value, the results have equal weight.



4. To determine the best day of month to dollar cost average, choose the lowest "percent above 30 trading day moving average" value.



Chart:

The Results:

The best two days of the month to dollar cost average are on the 26th (#1) and 25th (#2) with the lowest value of percent above 30 trading day moving average.

#3a: 19th    (0.20%)
#3b: 27th    (0.20%)
#4a: 10th    (0.22%)
#4b: 24th    (0.22%)

The rest of the values can be seen in the chart above.

Beginning of the Month Boost:

At the beginning of the month, the percent above 30 trading day moving average seems to be at its highest values.

One possible reason why is because of investment in 401k and retirement funds close to the beginning of the month, which pushes the S&P 500 up during this time.

"Don't Fight the Fed" is Wrong? What Is One Year Return After Rate Hikes or Rate Cuts?

A. There is a common Wall Street mantra: "Don't Fight The Fed".


When the Fed is pumping liquidity (reducing Fed Funds Rate, instituting Quantitative Easing (QE)), you should follow the market upwards.  If the Fed is taking away liquidity (raising Fed Funds Rate, and taking away Quantitative Easing), then be careful in the stock market.


This "Don't Fight the Fed" mantra seems to have worked very well since 2009, as the Fed cuts rates and institutes many Quantitative Easing programs, resulting in the stock market having a very good rally.


If the Fed starts to cut back on Quantitative Easing and raises rates, it is best to be careful in the market.


B. Is "Don't Fight the Fed" still Valid?


Since July 2000 (till July 2014), what is the one year future return of the S&P 500 every time the Fed has raised or cut the Fed Funds rate?   Does this validate "Don't Fight the Fed?"


The results are as follows:
1. The S&P 500 return one year after the Fed cuts rates (since July 2000) averages: -14.2%
2. The S&P 500 return one year after the Fed raises rates (since July 2000) averages: 10.1%


Based on the one year forward return after the Federal Reserve cuts or raises rates, the S&P 500 is up when the Fed raises rates, and the S&P 500 is down when the Fed cuts rates.


This is opposite of the mantra: "Don't Fight the Fed!"


C. There is a better correlation using another metric: The actual Fed Funds Rate


Since the "Don't Fight the Fed" doesn't seem to work, is there a better metric to determine whether the one year S&P 500 forward return would be positive or negative?


After researching the data, it isn't whether the Fed is cutting rates or raising rates, but the actual Fed Funds rate plays a big role in the S&P 500 forward return:


The results are as follows:


Since July 2000, the S&P 500 return one year after the Fed changes rates (up or down) or announces a QE program when:


1. Fed Funds Rate is less than or equal to 1%:  13.1%
2. Fed Funds Rate is between 1% and 2% (not including 1%): -1.9%
3. Fed Funds Rate is between 2% and 3% (not including 2%): -8.9%
4. Fed Funds Rate is between 3% and 4% (not including 3%): -7.1%
5. Fed Funds Rate is between 4% and 5% (not including 4%): -6.3%
6. Fed Funds Rate is between 5% and 6% (not including 5%): -2.1%


Based on this, the actual Fed Funds rate seems to have a better correlation with the S&P 500 one year forward return.   The best one year S&P 500 forward return is when the Fed Funds Rate is less than 2%.   Fed funds rate greater than 2% has a more negative one year forward S&P 500 return.




D. Data Points:

Date	Fed Funds Start	Fed Funds End	Fed Funds Diff	S&P	S&P Date + 1 year	S&P + 1 year	Return
7/3/2000		6.5		1469.54	7/3/2001	1234.45	-16.0%
1/2/2001	6.5	6	-0.5	1283.27	1/2/2002	1154.67	-10.0%
1/31/2001	6	5.5	-0.5	1373.73	1/31/2002	1130.2	-17.7%
3/19/2001	5.5	5	-0.5	1170.81	3/19/2002	1170.29	0.0%
4/17/2001	5	4.5	-0.5	1191.81	4/17/2002	1126.07	-5.5%
5/14/2001	4.5	4	-0.5	1248.92	5/14/2002	1097.28	-12.1%
6/26/2001	4	3.75	-0.25	1216.76	6/26/2002	973.53	-20.0%
8/20/2001	3.75	3.5	-0.25	1171.41	8/20/2002	937.43	-20.0%
9/14/2001	3.5	3	-0.5	1037.77	9/14/2002	889.81	-14.3%
10/1/2001	3	2.5	-0.5	1038.55	10/1/2002	847.91	-18.4%
11/5/2001	2.5	2	-0.5	1102.84	11/5/2002	915.39	-17.0%
12/10/2001	2	1.75	-0.25	1139.93	12/10/2002	904.45	-20.7%
11/5/2002	1.75	1.25	-0.5	915.39	11/5/2003	1051.81	14.9%
6/24/2003	1.25	1	-0.25	983.45	6/23/2004	1144.06	16.3%
6/29/2004	1	1.25	0.25	1136.2	6/29/2005	1199.85	5.6%
8/9/2004	1.25	1.5	0.25	1065.2	8/9/2005	1231.38	15.6%
9/17/2004	1.5	1.75	0.25	1122.2	9/17/2005	1237.91	10.3%
11/9/2004	1.75	2	0.25	1164.08	11/9/2005	1220.65	4.9%
12/13/2004	2	2.25	0.25	1198.68	12/13/2005	1267.43	5.7%
2/1/2005	2.25	2.5	0.25	1189.41	2/1/2006	1282.46	7.8%
3/21/2005	2.5	2.75	0.25	1183.78	3/21/2006	1297.48	9.6%
5/2/2005	2.75	3	0.25	1161.17	5/2/2006	1313.21	13.1%
6/29/2005	3	3.25	0.25	1199.85	6/29/2006	1272.87	6.1%
8/8/2005	3.25	3.5	0.25	1223.13	8/8/2006	1271.48	4.0%
9/19/2005	3.5	3.75	0.25	1231.02	9/19/2006	1317.64	7.0%
10/31/2005	3.75	4	0.25	1207.01	10/31/2006	1377.94	14.2%
12/12/2005	4	4.25	0.25	1260.43	12/12/2006	1411.56	12.0%
1/30/2006	4.25	4.5	0.25	1285.19	1/30/2007	1428.82	11.2%
3/27/2006	4.5	4.75	0.25	1301.61	3/27/2007	1428.61	9.8%
5/9/2006	4.75	5	0.25	1325.14	5/9/2007	1512.58	14.1%
6/28/2006	5	5.25	0.25	1240.12	6/28/2007	1505.71	21.4%
9/17/2007	5.25	4.75	-0.5	1476.65	9/16/2008	1213.6	-17.8%
10/30/2007	4.75	4.5	-0.25	1531.02	10/29/2008	930.09	-39.3%
12/10/2007	4.5	4.25	-0.25	1515.96	12/9/2008	888.67	-41.4%
1/18/2008	4.25	3.5	-0.75	1325.19	1/17/2009	850.12	-35.8%
1/29/2008	3.5	3	-0.5	1362.3	1/28/2009	874.09	-35.8%
3/17/2008	3	2.25	-0.75	1276.6	3/17/2009	778.12	-39.0%
4/29/2008	2.25	2	-0.25	1390.94	4/29/2009	873.64	-37.2%
10/7/2008	2	1.5	-0.5	996.23	10/7/2009	1057.58	6.2%
10/28/2008	1.5	1	-0.5	940.58	10/28/2009	1036.19	10.2%
11/25/2008	Start QE1	Start QE1	0	857.39	11/25/2009	1110.63	29.5%
12/15/2008	1	0.25	-0.75	868.57	12/15/2009	1107.93	27.6%
3/31/2010	End QE1	End QE1	0	1173.27	3/31/2011	1325.83	13.0%
11/3/2010	Start QE2	Start QE2	0	1197.96	11/3/2011	1261.15	5.3%
6/30/2011	End QE2	End QE2	0	1320.64	6/29/2012	1362.16	3.1%
9/13/2012	Start QE3	Start QE3	0	1687.99	9/13/2013	1687.99	0.0%

SDIV: Global, High Dividend Exchange Traded Fund (ETF), Good Diversity.

Are you looking for a single ETF or mutual fund to help give you great diversification and a high dividend?  You should consider an international ETF which produces a high dividend.  SDIV, an ETF (Exchange Traded Fund) from Global-X Funds, does that.


As of June 2014, the 12 Month Dividend Yield is 6.01%.   The Total Annual Fund Operating Expense is 0.58%.     


In terms of country breakdown, 25.81% is invested in the United States, 17.85% in Australia, 9.14% in Canada, 8.14% in France, 7.69% in the U.K., 6.01% in Singapore, and so on.


In terms of industry, Financials occupies 20% of the portfolio, REITs (Real Estate Investment Trusts) 15%, Utilities 13.5%, Telecom Services, 12.2%, Mortgage REITs 10.6%, Energy 9.2%, Industrials 5.03%, Consumer Discretionary, 4.8%, Health Care 2.8%, Materials 2.7%, and Info Tech at 2.1%.  


SDIV could be a great way to get high dividend diversification.   And if you can find SDIV in a commission free program by your broker, you could invest in SDIV cheaply (because you have no commission fee) in an automatic investment plan where you invest some regular sum at regular intervals.   Watch your reinvested dividends (especially in a high dividend ETF), grow.   Experts often say that reinvested dividends is a great way to grow your money.