Be a proactive investor

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Q: How can I be a more proactive investor during the Summer Doldrums or periods of market weakness in general?

A: The time period from Memorial Day to Labor Day is what is referred to as the "summer doldrums." More often than not, this is when the market goes through a corrective or consolidation phase full of plenty of "whipsawish" activity.

It is not a cliche that the summer months are bad for the stock market -- it is a fact. The old adage "sell in May and go away" is not just a cute aphorism but is founded in reality.

Over the past fifty years, the vast majority of annual gains logged by the Dow Jones Industrial Average have occurred during the six months of November through April. The May through October period has produced a net decline. This trend has been even more pronounced the past three years.

This seasonal pattern is simply too powerful to ignore. And European debt concerns certainly make us vulnerable to another summer of equity market malaise. That said, by recognizing and respecting the historical patterns, investors can set themselves up for strong outperformance by using the weak market months to uncover positions that should perform well into year-end and the start of the next year, the seasonally strong period for equities.

Market weakness presents opportunity. In an effort to help prepare you for the next leg up, I compiled a special educational series of SIX must-read strategies and tactics.

You will get the ideas and tactics that our analysts use to identify opportunities and education on topics including how to use technical and fundamental analysis to uncover the next batch of market outperformers, how to enhance returns during periods of market weakness and how generally to be a more proactive investor.

While a down or flat market is frustrating to most, we view these periods as a chance to uncover great opportunities that can boost the portfolio for several months up to several years. My expectation is that this exercise will make you a far more astute investor.

Damon Southward
Chief Market Strategist

MARKET PLACE