TSP Allocation Strategy

The January Effect

A post from my other blog that also applies to TSP funds…

The Seasonal Indicator

Much like the term “Santa Rally”, you will hear various definitions and explanations of the term “January Effect” in the media.  I was originally going to lead this post with the Investopedia and Wikipedia’s definitions, but the definitions were lacking and I did not want to create any confusion.  I will provide them at the end instead.   As always, what matters the most for investors is the historical performance of the stocks and determining if the effect is still tradable or in the case of the January effect should one shift investments to small cap stocks.  I will not attempt to define the term, but a general discussion of effects is warranted. 

Longitudinal studies of the seasonal tendencies show some tendencies have shifted over 30 and 50 year time frames or when seasonal drivers of money flows have changed.  The January effect is one of these shifting tendencies and careful examination…

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