Having a strong, diverse stock portfolio is vital to your overall success in your investments. However, just how strong it is will depend on which stocks you add to your portfolio, and how these rise and fall. While there is no way to 100% predict how certain stocks will perform, there are some undercurrents that return all the time, and these have a significant impact on the market as a whole. This is known as 'seasonality' and it affects all stocks, including utility stocks.
Seasonality:
Seasonality is not the same thing as market timing, however. Market timing helps you to choose the bottom and top of price patterns on a short term market. Seasonality, by contrast, is about historical influences and patterns, enabling investors to be proactive with their knowledge. Three common seasonality factors are the year end and January effect, the turn of the month, and Mondays and holidays. Two others are summer and winter, which is when you will have to make the greatest adjustments to your stock portfolio.
Summer:
It is said that you should always sell your stocks towards the beginning of May, and that you should come back to them after Labor Day. This is a generalization and shouldn't be followed to the letter, but it is a good guideline, nevertheless. What you have to understand, however, is how the summer season affects different stocks, and whether they become bearish or bullish during these months. For instance, utility stocks act bullish, even though the seasonality is classed as bearish. This means that you have to check the IDU stocks at the start of April, as this will tell you what your utility stocks are likely to do as well.
By switching to ETFs like IDU, you don't actually work with an entire index, but rather with individual stocks. This has far stronger patterns in terms of whether they go bullish or bearish. Summer, for many, is a fantastic seasonality opportunity.
Winter:
Come October, IDU tends to turn bearish. This is when we start to focus more on the industrials. The best whole index to check here is the DIA SPDR ETF, which follows the Dow Jones Industrial Average. Again, utility stocks do the opposite of the standard seasonality.
Remember, however, that these are always general trends and therefore not guaranteed. When you understand the patterns, you are more likely to make a successful trade, but it doesn't mean that you are completely free of risks. Trading is always risky and you must be aware of that.
If you're still questioning just how powerful seasonality actually is, consider that, if you had consistently invested in small caps during winter since 1950, would have had a 71,301% gain. Had you made those exact same investments in the winter months, your yield would have been only 240%. That is a huge difference on a financial market and truly demonstrates why you need to consider not just what you invest in, but when you decide to invest in it as well. Following the markets is just a small element of that.