One old stock-market adage holds that as January goes, so goes the year. While that's certainly not a rule without exceptions, it is true that in 4 of every 5 years since 1950, January's performance has successfully predicted the year's trend. In 2000, for instance, the Dow Jones Industrial Average tumbled nearly 5 percent in January - kicking off a year in which the Dow finished down nearly 7 percent from 1999.
The "as January goes" saying isn't the only market lore surrounding the new year. According to the oft-cited "January effect," small-cap funds, in particular, will do well in the next few weeks. Various studies have shown smaller stocks outperform large stocks in January by as much as 10 percentage points over the years.
Even disregarding the size of the stock, January tends to be a strong month. Many investors are wary of October, the month of corporate earnings statements. But if the tenth month is remembered for a history of huge declines (in 1929, 1987, and 1997), the year's first month has won a reputation for being a good time to invest.
Indeed, in 64 of the past 100 Januaries, the Dow has seen gains - putting it just behind December (where the index has gone up 73 times), and tied with August, as the second-best month. In contrast, only 42 Septembers have registered gains.