Investment proverbs and clichés are often met with skepticism, but the data supporting the concept of a December market rally is compelling. This popular notion suggests that December typically yields strong stock market performance, prompting investors to consider enhancing their portfolios during this period.

Data from investment firm Fidelity reveals that the FTSE 100 has posted positive returns in 24 of the previous 30 Decembers, while the S&P 500 has achieved this in 23 out of 30 years.

Even in challenging times—such as during the global financial crisis of 2008 or the lockdowns during December 2020 and 2021—these indices still managed to deliver respectable results.

The most notable December for both indices occurred in 2010, a year riddled with crises, including a bailout request from Greece and a devastating BP oil rig explosion. Despite these hurdles, the FTSE increased by 6.5 percent, and the S&P 500 rose by 6.8 percent, defying expectations.

This December market trend is not confined to the US and UK; a study by trading platform eToro, which analyzed performance over 50 years for 14 major global markets, showed an average of 23 percent of annual gains occurring in December.

A few factors contribute to this trend. December is often quieter for trading, as many traders in London and New York take vacation time, leading to fewer transactions and resulting in amplified price movements. Additionally, this time of year often brings year-end bonuses, prompting more investment in portfolios, which can also push share prices higher.

Furthermore, behavioral finance plays a role; the pattern of the Santa rally encourages more investors to pile in, creating a bandwagon effect. This herd mentality can inflate market values as individuals invest not out of sound strategy but because of collective trends.

However, this isn’t a guaranteed reliable pattern. For example, in December 2002, the FTSE 100 faced a 5.4 percent decline, and in 2018, the S&P 500 dropped by 9 percent, highlighting that holiday trading trends can sometimes backfire.

As for predictions for this year, the current outlook is rather flat with the FTSE 100 and S&P 500 not showing significant movement yet in December, but the month is not over.

One way to participate in a potential rally, should it occur, is by investing in a broad market tracker fund. This could be a fund that captures global market movement or focuses on specific regions like the US, UK, or Japan.

Investing in individual stocks comes with more complexity but can yield greater rewards compared to simply holding a tracker fund, provided the selections are made wisely.

According to eToro, the mining company Antofagasta leads the FTSE 100 with a 21 percent rise thus far in December 2023, followed by Rolls-Royce at 16 percent and easyJet at 15 percent. Over the past five Decembers, Fraser Group has shown an average increase of 12 percent during the festive season, Antofagasta has climbed 9 percent, and Taylor Wimpey has gained 8 percent.

Ultimately, it’s vital to avoid focusing solely on any single month’s performance. Timing the market for the perfect investment moment is often elusive, making long-term engagement in the market a more prudent strategy.

Therefore, I won’t be canceling my holiday shopping plans and redirecting that money into an investment account, as my family will likely appreciate. My regular investment contributions will continue, ensuring I enhance my portfolio in both stronger and weaker months.

While the FTSE 100 has seen a slight uptick this month, it has recorded a 10 percent gain this year and approximately 23 percent over the last decade. The S&P 500 has increased by 27.6 percent this year and nearly 230 percent over the last ten years. My global tracker fund has also performed well, up 23 percent in the past year.

This reinforces the idea that investing is a lifelong journey—it’s not just a seasonal endeavor.