The Easiest Market Beating ‘System’ of All Time

  • SumoMe

How’s that for an ambitious title?  And I actually believe the title to be accurate.  But I do feel compelled to point out specifically that the title reads “The Easiest Market Beating System of All Time” and NOT “The Greatest Market Beating System of All Time”.  Regarding the former, I am not entirely sure such a thing exists (but it you have it, please feel free to contact me).

For now, we will have to stick to “Easiest”.

The “System”

The “system” – such as it is – goes like this:

*Hold cash during September

*Hold the Dow Jones Industrials Average during all other months

Did I mention the word “easy”?

Lord knows I did not mention the words “rocket” or “science”.

Can it really be this simple?  As long as you have a long-term investment horizon, the answer appears to be “Yes”.  The reason for this appears in Figure 1 which displays the growth of $1,000 invested in the Dow Jones Industrial Average ONLY during the month of September every year starting 1890 (yes, during that Benjamin Harrison administration)

1Figure 1 – Growth of $1,000 invested in the Dow Jones Industrials Average ONLY during September (1980-2016)

For the record the Dow:

*Has lost -79.3% on a cumulative basis during September since 1890.

*was up 52 times (40.9%)

*was down (or unchanged one time) 75 times

*Average gain during Up Septembers = +3.7%

*Average loss during Down Septembers = -4.4%

To create a “system” – again, such as it is – I used month-end closing price for the Dow Jones Industrials Average going back to 12/31/1889 (no dividends are included) and ran the following test:

*Buying and Holding the Dow expect during September


*Buying and Holding the Dow during ALL months

For testing purposes I assumed that annualized rate of interest of 1% was earned while in cash.  The results:

*$1,000 invested in the Dow using a buy-and-hold approach grew to $604,910 through July 2017

*$1,000 invested using the “system” grew to $3,252,139 during the same time

Again, these results are based solely on price data and NOT total return data which would have added dividends.

To get a better sense of how this all plays out I have broken the test period into two periods: 12/31/1889 through 12/31/1954 and 12/31/1954 through 7/31/2017.2Figure 2 – “System” versus Buy-and-Hold (1890-1954)

The second period extends from 12/31/1954 through 7/31/20173Figure 3 – “System” versus Buy-and-Hold (1954-2017)

For the record the system:

*Outperformed buy-and-hold 59.8% of all calendar years

*Outperformed buy-and-hold 65% of all rolling 5-year periods

*Outperformed buy-and-hold 69% of all rolling 10-year periods

*Showed a 10-year gain 95% of the time versus 86% of the time for buy-and-hold


So does any of this really qualify as a “system”?  Will it continue to beat the market handily over long periods of time? Does it really make sense to get out of the stock market every year during September? Will September 2017 show a gain or a loss?

It beats me.  The only thing I can state for sure is: the system detailed above sure is “easy”.

Jay Kaeppel

Disclaimer:  The data presented herein were obtained from various third-party sources.  While I believe the data to be reliable, no representation is made as to, and no responsibility, warranty or liability is accepted for the accuracy or completeness of such information.  The information, opinions and ideas expressed herein are for informational and educational purposes only and do not constitute and should not be construed as investment advice, an advertisement or offering of investment advisory services, or an offer to sell or a solicitation to buy any security.