January Effect Explanations

Besides tax-loss harvesting and repurchases, and investors putting cash bonuses into the market, the January Effect is affected by investor psychology.

• Some investors feel that January is the best month to begin an investment program.
• Others think that mutual fund managers buy top performers' stocks at the end of the year and dispense questionable losers for appearance sake in the year-end reports.
• Year-end sell-offs attract buyers interested in the lower prices.