Money News

Time to Do Nothing?
Picking up on the meteorological theme, at left: mutual-fund investors can be a fair-weather bunch too, withdrawing and reinvesting money along with the market's ups and downs. Problem is, they often act at the wrong time and make less than they would have if they had done nothing at all. While the S&P 500 returned an annualized 12.2% from 1984 through 2002, the average stock-fund investor saw a meager 2.6% yearly gain — which didn't even outpace inflation (ringing in at 3.1%), according to a recent study by Boston research firm Dalbar Inc. The reason: the average investor held fund shares for just 30 months, often mistiming the market. Bond-fund investors held shares for 34 months on average, for an annualized return of 4.2%, which beat inflation but lagged government and company bond indexes.

Sunny Money On Wall Street
Stocks rally when the sun shines, according to the latest issue of the Journal of Finance. David Hirshleifer of Ohio State University and Tyler Shumway of the University of Michigan looked at stock markets in 26 countries over 16 years and found that performance goes up as cloud cover goes down, bolstering a claim first made a decade ago. The reason is what you might think: sunny weather leads to a sunny disposition and a more optimistic outlook on prospects. There's no money in sunny, though. Transaction costs will probably erase any benefit gained trading on nice days. The real lesson: "Somebody out there is trading on emotion," says Shumway. "That shouldn't be you."

How New York City's Weather Affects Stock Performance
Completely cloudy days 8.7%
All days 15.7%
Completely sunny days 24.8%

U.S. Datastream market index, 1982-97, annualized
Sources: Datastream; National Climatic Data Center