The summer swoon takes its toll on investors. But, history suggests investors using summer's sell-off to buy technology stocks are rewarded come the end of October.
Using data from The Seasonal Investor, I crunched the numbers to see how widely traded ETFs perform in the three months starting August and ending October.
Historically, buying technology - a historically challenged summertime basket - has been the right move.
The following table breaks out the strongest ETFs for the next three months, based on the percentage of years they've traded higher.
The S&P Software ETF (NYSEARCA:IGV) offers the best overall seasonality, finishing October higher than it begins August in 9 of the past 10 years, producing an average 6.52% gain.
However, bear in mind returns are not evenly distributed.
Instead, they're back-end loaded. For example, while the IGV has been up strongly at the end of the period, it's only finished August higher 5 times in the past 10 years. This is hardly a robust endorsement for going all in during the first week in August. Instead, it suggests investors are best served patiently accumulating their favorite plays over the next 6 weeks.
For those curious, here are the top holdings for the IGV:
|Company||Symbol||% of Assets|
Disclosure: I am long TIP.