September and October have a reputation for storms. Here's why the headlines should matter least to the people with the most at stake.
There's an old observation on Wall Street that has been repeated so many times it's easy to dismiss: "Sell in May and go away."
But there's a quieter one that has aged far better: the market's worst days have a way of arriving in autumn.
October 1929. October 1987. September 2008. Look through the worst single days and worst single months in the last century of market history, and an extraordinary share of them happened between Labor Day and Thanksgiving. Traders have a name for it — the September Effect — and every year, when the calendar turns, the financial media starts writing its annual piece asking whether this is the year it happens again.
I'm not going to predict that. Nobody can. But I will tell you what I tell every client who asks about it, because someone should.
The scariest months in market history were also, mostly, ordinary ones.
For every October 1929, there are dozens of Octobers that did nothing memorable at all. And here's the part that matters more: the investors who were harmed most by 1929, 1987, and 2008 were not the ones who owned stocks. They were the ones who owned stocks without a plan — and sold at the bottom of a storm they never prepared for.
Volatility is a weather report. A plan is the house.
When a hurricane track shifts toward South Florida, you don't sell your house. You check your shutters, your supplies, and your evacuation route — because you prepared before the season, not during it.
Your financial plan works the same way. Diversification is the storm shutter. A cash reserve for near-term needs is the supply kit. A written, reasoned strategy is the evacuation route you hope never to use but are glad exists.
With those in place, a volatile October isn't a threat. It's a sale — on quality assets, at prices that patient investors eventually get paid to accept.
Time in the market beats timing the market — and autumn is the season that proves it.
The single worst habit an investor can carry into September and October is the conviction that they can step out of the market before a storm and back in before the recovery. The data is brutal on this: the market's best days cluster suspiciously close to its worst days, and the investors who miss the worst days by selling usually miss the best days by sitting out.
You don't have to take my word for what staying invested is worth. Take the market's: through wars, recessions, elections, crashes, and every October in between, the long-term direction of a diversified portfolio has been up — because you weren't betting on a season, you were betting on progress.
What a plan actually does in a stormy October
It tells you, in advance, what you own and why you own it. It sets the cash reserve so you're not a forced seller. It sets the rebalancing discipline so a drawdown becomes an opportunity, not an emergency. And it gives you one number to call before you make a move you can't take back.
That last part is the entire reason I do this work. Not to predict the weather — to make sure you never have to.
So this fall, when the headlines get loud and the "Is October Dangerous?" pieces start appearing, let them be a reminder of the only autumn tradition worth keeping: reviewing whether your plan is built for the storm you can't predict, instead of predicting storms no one can.
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This article is for educational purposes only and does not constitute investment, tax, legal, or insurance advice. Securities and advisory services offered through Cetera Advisors LLC, member FINRA/SIPC. Advisory services offered through Cetera Investment Advisers LLC. Please consult a qualified financial professional regarding your individual circumstances.