I heard an interesting story on Marketplace yesterday evening. Apparently, the statistics show that the stock market performs better when the U.S. Congress is on vacation.
They call it the Congressional Effect: the fact that Wall Street does better in periods like August, when Congress is on holiday. And not just somewhat better. Nearly all the gains in the Dow over a century have come when Congress was on holiday.
“Nearly all” means tat by investing only when Congress is out of session, and switching to money mareket funds while Congress is in, you’re set for making more money overall. Market timing is risky, so it’s not something I would recommend. Nevertheless, there are other ways to make money off of the Congressional Effect.
The Singer Conrgressional Fund is a hedge fund that strategically invests to take advantage of this effect. A fund like this is likely difficult for the small investor to get into, so an alternative could be making use of futures. Amity Shlaes has a few more suggestions in the MarketPlace piece (which you can listen to here).
The fees and taxes associated with frequently selling and buying, for the small investor, will probably reduce any of the large returns you might see otherwise.
Updated February 7, 2012 and originally published August 26, 2006. If you enjoyed this article, subscribe to the RSS feed or receive daily emails. Follow @flexo on Twitter and visit our Facebook page for more updates.