Never buy stocks when Congress is in session, or so goes the mantra of portfolio manager Eric Singer's Congressional Effect Fund.
The strategy appears to be working: the fund has gained 10.5 percent since its inception in May 2008 compared with 3.6 percent for the S&P 500, according to USA Today.
When Congress is in session, uncertainty increases, and uncertainty is a bad thing for stocks.
"Every time they talk about a law, or changing the rules for an industry sector, companies have the uncertainty that their business model may change," Singer says.
"There are 252 trading days, and Congress is typically in session for 150 to 180 days," Singer says.
Add to that, Congress is in session often during the historically worst times of the year, such as September.
Furthermore, Congress is on break during holidays, when optimism boosts stock prices.
From mid 2008 to March 2009, the S&P 500 fell 36 percent.
Now that the index is rising, many investors are coming in at the wrong time, experts say.
"Bailing in 2008 was the first mistake, but now many are compounding it by coming back in when the market is much higher," says financial adviser Frank Armstrong of Investor Solutions in Coconut Grove, Fla., according to Money Magazine.
Others agree that too many people are timing the market poorly.
"The biggest mistake I see right now is people treating all their money as short term," says Carlo Panaccione, a wealth manager at Navigation Group in Redwood City, Calif., according to Money Magazine.
"There's no way you reach your long-term goals with everything invested for the short term."
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