Human emotions can be very difficult to overcome especially during stressful and/or desperate times. On the other side of the coin, situations that lead to overconfidence can be just as difficult to overcome. When it comes to investing, weighing heavily on emotions usually lead to regret.
I constantly need to keep my emotions in check. Meditation helps. Also, using rules keeps me from crossing that fine line into gambling (I’ve laid out my set of rules in my first blog entry). That said, I think it’s also good idea to tweak your strategy every now to maximize returns.
Based on the seasonality chart from my last entry, it appears the best time to buy stocks is beginning of October and the worst time to invest is mid-September. From mid-June to mid-September, the market is relatively flat.
To maximize returns based on this information, below is a breakdown of a tweak in my strategy:
- January to mid-February – Take a vacation.
- March to June - Sell puts, buy stocks.
- June to mid-September – Sell deep out-of-the-money covered calls and puts.
- Mid-September to beginning of October – Sell covered calls.
- Mid-October to end of December - Sell puts, buy stocks.
Admittedly, I am not a technical trader. I don’t base my stock transactions on a lot of chart analysis. However, a 20-year seasonal chart illustrates deep history into investor behavior. I really don’t think humans change all that much when it comes to fear and greed and keeping those emotions at bay should make for better returns.
