History Says September Is the Worst Month for Stocks. Here's What Investors Should Actually Do.

Since 1928, the S&P 500 has produced an average return of negative 1.17% in September. It has fallen in September in 56% of years since then, and September is the only month with a negative long-term return track record.

However, it's worth pointing out that "usually" and "always" are two different things. A decline in September in 56% of all years also means the month is positive 44% of the time. Here's the real data, whether investors should take action, and three important things for investors to do, even if September is a bad month for stocks.

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September is the worst month. Here's why you shouldn't sell.

The seasonality is real. As mentioned, the average September produces a 1.17% negative total return in the S&P 500, and that's according to Bank of America (NYSE: BAC) data.

Not only that, we're seeing some of the key signs that this September could be a rough one. According to Carson Investment Research, when the S&P 500 gains more than 1% in August and produces five or more record highs, September has been negative even more often.

Having said that, let's put things into perspective. The S&P 500 has returned an average of 13.4% over the 12 months following a record high, from 1988 through 2023. That's compared to an average of 11.9% over all 12-month periods during that time frame.

A 1.17% average decline in September simply isn't worth selling in anticipation of. For one thing, you could get hit with tax bills on any profitable investments that effectively produce far more than a 1.17% decline. And it's simply not worth the risk of timing. As a hypothetical example, the S&P 500 might see a slight decline, as it does in a typical September, or we could get positive news on the Iran war, inflation, and/or tariff uncertainty, and the S&P 500 could soar by 10%. That might sound like a stretch, but it certainly could happen.

What you should do instead

While it's not a great idea to sell stocks and ETFs just because September is historically the worst month for stocks, there are some things that are smart to do:

• Keep your automatic contributions going into your investment account. This will give you dry powder to deploy at favorable prices if the market does have a rough September.
• Have a list ready of the stocks you would buy if they fell by 10% in September.
• Check whether your portfolio needs rebalancing, whether any positions have outperformed, or whether your overall stock and bond allocation has drifted out of alignment.

The bottom line is that September could indeed be a rough month for the stock market. But there's a lot that could go right as well. The best move is to ignore the noise and stay the course.

Bank of America is an advertising partner of Motley Fool Money. Matt Frankel, CFP® has positions in Bank of America. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.