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The sayings point to stockmarket anomalies. Regular patterns should not exist in a market that is fairly reflecting all published information on companies and economies. If opportunities are obvious to everyone, they should quickly be exploited by the smartest investors.

Recently, two beliefs have been called into question. Investors who sold in May missed out on an 18% rally this year in the FTSE 100 Index. Now September is surprising, with strong gains. Academic studies have shown it to be the worst month on average for share performance – the only one in which prices typically fall. But this conceals a huge range of returns between years.

Investment folklore also focuses on the challenge of big round numbers. Gold’s recent move above $1000 grabbed the headlines. It is believed to be difficult for an index to move through numbers like 5000 for the FTSE 100 or 10,000 for the US Dow Jones Average. Consolidation and setbacks are meant to follow. It is human nature to anchor on round numbers, but the indices themselves are not always the most representative indicator for the overall market.

Academic studies have found the weekend effect hard to explain, with better performance typically on Fridays than Mondays. Companies burying bad news after hours on Friday might explain this. Other studies have wondered whether hedge funds make share sales on Monday mornings when the main investing institutions are holding their weekly team meetings, and not buying.

More helpful is the momentum reversing pattern; shares that perform particularly badly in the previous year tend to be good bets for recovery over the next twelve months. The effect has been well documented in many major stockmarkets over several decades. But it does require strong nerves and a great deal of patience. The pattern might impress academics, but that does not easily translate to making money in the real world.

The momentum effect is the winner this year, with few other patterns working. But, none provides a good basis for portfolio investment. Instead, unusual stockmarket behaviour, seasonal patterns and volatility are best dealt with by consistent investment. Monthly savings, benefitting from pound cost averaging, is the right strategy to deal with all these effects.

www.svmonline.co.uk

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