September Is Historically the Worst Month for the Stock Market. Is Now the Time to Cash Out?

September is right around the corner, and it's not typically a great month for the stock market. In fact, historically, it's known to be the worst month for the markets. With the S&P 500 (SNPINDEX: ^GSPC) also being at record highs, there may be some added risk this time around.

Should investors consider taking their money out of the stock market before September hits, or is remaining invested still a good option for the long run?

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Is September destined to be a bad month for the stock market?

Historical data going back over a century suggest that stocks are less likely to rise in value in September than in other months of the year -- 43% versus 60% of the time, based on stocks in the Dow Jones Industrial Average.

Last year, the S&P 500 ended up rising by 3.5%. The year before that, it was up by 2%. However, in 2023, it did end up falling by nearly 5%, which still wasn't nearly as bad as the 9% decline it experienced in 2022, when the market was in the midst of a full-blown crash.

While historical data may suggest September is not usually a great month, it has been a good month for the stock market over the past couple of years. With investor sentiment strong and companies performing well, it's entirely plausible that stocks could rally next month.

^SPX data by YCharts

Trying to time the market is risky

Getting in and out of the market based on historical trends isn't an ideal strategy, as it can lead to selling investments at inopportune times in favor of probabilities. That can result in missing out on potential gains later on, especially if the market remains hot.

Stocks may end up falling in September, for no other reason than valuations for many companies have become incredibly high this year, and a pullback is warranted. But there's no assurance that will happen, and investors don't need to exit the stock market or sell all their investments just because it's September. Every year is different, and there's no guarantee that getting out in September and buying back in later will be a good move.

For investors who are worried about risk, investing in value stocks or dividend stocks can be a more practical option than trying to time the market. And for those who aren't in a rush, simply staying invested and hanging on for the long run may still be the best approach.

David Jagielski, CPA has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.