September Is Usually the Worst Month for Stocks. Here’s How to Prepare

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Don’t let September’s stock market losing streak scare you. Here’s how to gear up for what may or may not be a turbulent month. [[{“value”:”

Some people dislike the month of September because they associate it with the end of summer (especially parents who don’t relish the back-to-school routine). Others love it because it’s a precursor to fall and all its pumpkin-filled glory.

But regardless of your personal feelings, one thing you should know about September is that it’s often a tough month for investors. That’s because it’s historically been associated with stock market declines.

The Stock Trader’s Almanac reports that on average, September is the month when the stock market’s three major indexes — the S&P 500, Dow Jones, and Nasdaq — usually perform the poorest. And that doesn’t bode so well for the coming month.

But one thing you should know is that September is not guaranteed to be a bad month for stocks. And given that there was a major sell-off in August, investors could be in for smoother September this time around. But it’s important to prepare for a September downturn — just in case.

How to gear up for stock values to drop

Regardless of the time of year, it’s important to be ready for a decline in stock values at any time. And one of the best ways to do so is to make sure you have enough money in your savings account to cover three to six months of essential bills.

What does the state of your savings account have to do with your brokerage account? It’s simple.

You can’t lose money during a stock market decline if you leave your portfolio alone. You only lose money when you sell off stocks or other assets at a price that’s less than what you bought them for.

If you have enough money in emergency savings to cover unplanned expenses, then you shouldn’t have to liquidate investments in your stock portfolio for cash. And in that case, you should be able to sit back and ride out periods of market volatility without having to risk taking losses.

Another important way to prepare for a stock market decline is to make sure your portfolio is diversified. This won’t automatically spare you from seeing an on-screen loss when you log into your brokerage account, because if there’s a broad market drop, it could impact pretty much every stock you own. But having a diverse investment mix protects you from major declines in a single industry or from a specific company.

What does this September have in store?

Without a crystal ball, it’s impossible to know how stocks will fare next month. On top of September being a historically volatile month, this is also an election year. And that alone tends to lead to stock market upheaval.

But no matter what happens this September, just know that it’s common for stock values to fluctuate at different times — for better and for worse. If we end up in a “for worse” situation, your best bet is to sit back and do nothing. Leaving your portfolio alone is a great way to ride out market declines without taking losses.

That said, if stock values drop steeply, there may be buying opportunities. So a final good thing to do right now is keep some extra cash in your brokerage account if you have it to spare. That way, if an opportunity arises to buy stocks on sale, you’ll be able to jump on it.

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