Why September Could Be a Great Time to Buy Stocks

Not sure whether to buy stocks now or wait? Trying to predict when stocks might go up or down is very difficult. There has been talk of a bubble in AI stocks for some time, and yet many top tech stocks have continued to rise despite these fears. The same goes for concerns about a recession — but that hasn’t stopped the stock market from hitting new highs this year.

Despite all the concerns and market trends, here’s why this month may be a great time to consider buying stocks.

September is historically the worst month for the market

Data from Dow Jones dating back almost a century suggests that investors should prepare for a rough month in September. On average, stocks are down 1.2% this month. It might not sound like one terrible performance, but not as good as in previous months, where the Dow typically does well, as well as S&P 500.

Over the long term, stocks normally increase in value as a whole, so you would expect that when you look at a very long time frame, the returns would be positive. That’s not to say, though, that there won’t be incredibly bad or good months along the way, but those fluctuations smooth out over time.

The fact that September still averages a negative return over such a long period means there are a lot of bad months in this calculation. Here’s how the S&P 500 has performed in September over the past five years.

Source: YCharts.

So why would this make September a good time to buy stocks?

If you expect stocks to fall in value this month, then that would mean investors who are holding stocks could see their investments decline. But for those who seek buy stocks, now may be an optimal time to do so, as this means stocks could be cheaper.

If you buy when stocks go up, then buy as prices go up. Buying them when they fall can set you up for better long-term returns. That doesn’t mean every stock is worth buying. But if a quality stock is falling just because of this seasonal market trend, then this could really be a good buying opportunity. A quality investment will likely pay off in the long run.

And if you don’t want to pick individual stocks, you can simply invest in an exchange-traded fund (ETF) like SPDR S&P 500 ETF Trust (SPY 0.52%)which will give you exposure to that index. Investing in a broad-based fund can allow you to take advantage of the overall path of the market.

And with the Federal Reserve likely to cut rates several times this year, that could be a catalyst for the broader markets, giving investors an extra boost this month — rate cuts could make growth stocks more attractive to buy in the near future.

A fall in interest rates will lower the cost of borrowing for companies, making it easier for them to pursue growth opportunities. By having exposure to the S&P 500, investors can take advantage of this without having to analyze and determine which stocks could benefit the most from rate cuts.

There is never a bad time to buy quality stocks

If you invest in good quality businesses, there is never a bad time to do it. If their shares fall in value, then they are cheaper to buy. And if they go up in value, they could have even more advantages. Risky purchases, on the other hand, are risky no matter the month.

If you are a long-term investor, you are likely to get a good return regardless of when you invest. As long as you buy quality business stocks with solid growth prospects, or perhaps just invest in a broad ETF that tracks the S&P 500, you’ll be in a good position to earn a solid return. September isn’t a great month for the market historically, but that doesn’t mean it’s a bad time to buy stocks.