The Turn Of The Month Trading Strategy (End Of Month Effect)
Last Updated on June 3, 2023
The end-of-month effect is a well-known trading strategy in the stock market. We have covered this anomaly before. Perhaps what is lesser known is that the effect spills over to the first three days of the next month. Thus, a more correct name might be the turn of the month strategy (or turn of the month effect).
The turn of the month strategy performs very well in most markets and frequently beats the buy and hold strategy despite its low exposure time. We go long at the close on the fifth last trading day of the month, and we exit after seven days, ie. at the close of the third trading day of the next month.
Thus, the strategy is invested around 33% of the time. In this article, we test the turn of the month effect and backtest the performance for a wide range of markets.
To get you started on what this strategy is all about we recommend reading a previous article:
Why is there a turn of the month effect?
Most likely the effect is caused by some structural forces like for example increased inflow of capital from savers or rebalancing from the fund management business. We don’t know for sure, and perhaps it doesn’t really matter why it exists.
Turn of the month strategy video
We test these markets for the turn of the month effect:
We look at the following sectors and markets:
- The S&P 500
- Emerging markets
- Healthcare stocks
- Retail stocks
- Gold mining stocks
- High yield funds
- Real estate stocks
- The gold price
- Long term Treasury bonds
- Consumer staples
- Brazilian stocks
- Japanese stocks
- Bitcoin
- Commodities
- Utilities
- Energy stocks
- Nifty Fifty (Indian market)
How we backtest the turn of the month strategy:
In some of the backtests we use the fund quotes from Fidelity funds. That’s because they contain data extending further back than most ETFs. This doesn’t mean we recommend the fund or Fidelity.

As a matter of fact, the Fidelity funds might be completely useless for trading because of, for example, fees and redemption time. Please think of them as proxies for other more tradeable instruments. At the end of the day, you need to your own due diligence.
The backtests start with 100 000 and the results are compounded. We enter at the close on the fifth last trading of the month, and we exit at the close on the third trading day of the new month.
The end of month/turn of the month seasonality in the S&P 500
The turn of the month strategy has worked very well for the S&P 500 since at least 1960:
As you can see, the turn of the month seasonality in the stock market has existed for 60 years!
If you were only invested during the last four and first three trading days of the month, you would have beaten buy and hold with significantly lower drawdowns (not adjusted for dividend reinvestments).
- CAGR: 7.2% (CAGR – why is it relevant for traders and investors?)
- Buy and hold CAGR: 7.1%
- Drawdown: -27% (why is max drawdown important in trading?)
- Buy and hold drawdown: -56%
Let’s flip it and check how the performance has been if we were only invested all the other days, ie. we buy on the close on the third trading day of the month and we sell at the close on the fifth last trading day of the month:
Not so good!
Can we expect the effect to work in other asset classes and stock markets? The S&P 500 is the “engine” that determines the short-term movement in markets worldwide and we can most likely expect many more markets and sectors to perform pretty similarly to the S&P 500.
Let’s test some random markets and industries:
The turn of the month/end of month seasonality in emerging markets
To test we use the ETF with the ticker code FEMKX, Fidelity’s emerging markets fund.
This is how emerging stocks performed by being invested only during the turn of the month:
- CAGR: 11.52%
- Buy and hold CAGR: 6.2%
- Drawdown: -34%
- Buy and hold drawdown: -72%
The turn of the month/end of month seasonality in healthcare stocks
We test by using Fidelity’s healthcare fund which has the ticker code HCPIX.
This is how healthcare stocks performed by being invested only during the turn of the month:
- CAGR: 10.1%
- Buy and hold CAGR: 7.9%
- Drawdown: -33%
- Buy and hold drawdown: -65%
The turn of the month/end of month seasonality in retail stocks
We use Fidelity’s FSRPX to test. This is what we got:
- CAGR: 12.2%
- Buy and hold CAGR: 9.6%
- Drawdown: -31%
- Buy and hold drawdown: -70%
The turn of the month/end of month seasonality in
gold mining stocks
Again, we use one of Fidelity’s funds: the ticker code is FSAGX. Gold mining stocks have been a poor long-term investment but the turn of the month has been reasonably consistent for over three decades:
- CAGR: 7%
- Buy and hold CAGR: 3.75%
- Drawdown: -54%
- Buy and hold drawdown: -79%
We have previously written about gold vs. gold stocks:
The turn of the month/end of month seasonality in
high yield funds
The ticker code for the test is SPHIX and shows a pretty significant edge by being invested only during the turn of the month:
- CAGR: 8.8%
- Buy and hold: 7.4%
- Drawdown: -8%
- Buy and hold drawdown: -31%
The turn of the month/end of month seasonality in
real estate stocks
The equity chart below is derived by using the ticker code IYR. As we can see, the end of the month effect has beaten the buy and hold over the last twenty years:
- CAGR: 10.9%
- Buy and hold: 8.8%
- Drawdown: -22%
- Buy and hold drawdown: -74%
The turn of the month/end of month seasonality in
in the gold price
Is there any end of month seasonality in the gold price? Because the gold price is “detached” from the stock market, the effect is low to non-existing. Below is our backtest on GLD:
- CAGR: 2.85%
- Buy and hold: 8.3%
- Drawdown: -33%
- Buy and hold drawdown: -45%
The turn of the month/end of month seasonality in
long-term Treasury bonds
What about long-term Treasury bonds? Not surprising, the end of month effect seems non-existing in TLT, quite the opposite:
- CAGR: 0.3%
- Buy and hold: 6.5%
- Drawdown: -23%
- Buy and hold drawdown: -26%
The turn of the month/end of month seasonality in consumer staples
Consumer staples are good trading stocks which we frequently make strategies in for our subscribers to the monthly Trading Edges.
But how do the consumer staples perform during the last and first day of the month? We test by using FDFAX, Fidelity’s consumer staples fund:
- CAGR: 8.5%
- Buy and hold: 7.6%
- Drawdown: -21%
- Buy and hold drawdown: -41%
The turn of the month/end of month seasonality in Brazilian stocks
Even in Brazil, the turn of the month seems to yield abnormal returns. The ticker code is EWZ:
- CAGR: 19.7%
- Buy and hold: 6.2%
- Drawdown: -43%
- Buy and hold drawdown: -77%
The turn of the month/end of month seasonality in Japanese stocks
The Japanese stock market has not performed well after the bubble burst in 1989, but it turns out the turn of the month effect has beaten the buy and hold handily, here shown by the ticker EWJ:
- CAGR: 6%
- Buy and hold: 1.7%
- Drawdown: -25%
- Buy and hold drawdown: -59%
The turn of the month/end of month seasonality in bitcoin
Even in bitcoin, we see a relatively stronger performance when we end the month and start a new month:
- CAGR: 51.3%
- Buy and hold: 94.2%
- Drawdown: -38%
- Buy and hold drawdown: -83%
The turn of the month/end of month seasonality in commodities
Commodities have performed poorly over the last decades, even on a much longer time frame. Perhaps they have performed better during the end of the month and the beginning of each month? It turns out commodities have performed well, but rather erratic. The below test is by using the ticker code DBC:
- CAGR: 5%
- Buy and hold: -1.8%
- Drawdown: -28%
- Buy and hold drawdown: -76%
The turn of the month/end of month seasonality in
utilities FUGAX
Even in the boring utility sector, we see strong gains at the end and beginning of each month. We tested by using Fidelity’s FUGAX:
- CAGR: 7.6%
- Buy and hold: 6.7%
- Drawdown: -24%
- Buy and hold drawdown: -71%
The turn of the month/end of month seasonality in
technology stocks FADTX
However, in tech stocks, it seems the effect is more erratic compared to the S&P 500. We tested by using Fidelity’s FADTX:
- CAGR: 8.6%
- Buy and hold: 9.5%
- Drawdown: -51%
- Buy and hold drawdown: -83%
The turn of the month/end of month seasonality in
energy stocks FANAX
In energy stocks, which have been poor performers over the last three decades, we see a strong effect at the end and beginning of each month. Fidelity’s FANAX shows abnormal returns by using our simple strategy:
- CAGR: 9.9%
- Buy and hold: 2.2%
- Drawdown: -39%
- Buy and hold drawdown: -82%
The turn of the month/end of month seasonality in
the Indian Nifty Fifty
Let’s end the article by looking at the Indian market. The Indian market has, to our knowledge, the most listings in the world, but we test by using the main index, the Nifty Nifty (^NFTY).
- CAGR: 9.7%
- Buy and hold: 9.5%
- Drawdown: -34%
- Buy and hold drawdown: -60%
Amibroker code for turn of the month strategy
If you’d like to have the Amibroker backtesting code and logic for the turn of the month trading strategy, plus all the other free strategies (125+), please click here:
Is the turn of the month strategy likely to continue?
If this is a structural behavior of how the markets work, which we believe it is, at least to a certain degree, the turn of the month trading strategy is likely to work well in the future. After all, the turn of the month strategy has performed consistently in the S&P 500 for over 60 years, even before passive index funds saw the day of light.
Hello Oddmund,
thank you again for your work and the related suggestions for my trading..!
Over the past few days I’ve had the opportunity to backtest some of the highyield-funds
I use for my strategy.
The results roughly matched your data.
If you use a simple trend filter for HY-funds (e.g. “only trades when Close> SMA 20”), some losing trades are avoided.
This increases the profit factor and the win-rate accordingly.
Hi Matt,
I love your input 🙂
I tested your suggestion on the high yield fund and the profit factor is 12…..
The win ratio is 90% and the average winner is 35% higher than the average loser. Pretty amazing result!
Do you trade Fidelity funds, how do you do it, if I might ask? I have never really looked into this in detail. Perhaps I should!
Oddmund
Hi Oddmund,
Of course…
The approach in Germany (where I live) is a little bit different.
There are a few professional fund platforms on which I can buy and sell mutual funds directly from and to the fund companies without any surcharge or other costs.
There are no redemption-fees as well. That means there are NO trading costs(!)
These platforms generate sales through the holding commissions paid by the fund companies. (“Kickbacks”).
I have around 7,500 bond and equity funds (which are approved for sale in the EU) to choose from on this sales platforms. Many of the 200 products on offer in the highyield- or “credit”-segment are rather mediocre, but few of them are excellently managed and work well with trend-following strategies. My whatchlist contains just 9 different funds.
Unfortunately, the delayed execution of my orders is a disadvantage; it takes 24 hours for most funds between my order and the quotation.
The platform I use allows many (even more complex) stopp-, buy- and sellorders, as well as stopp-based rotating from one fund into the other.
Furthermore, it offers me the purchase of mutual funds on credit to a certain extent.
For this reason, the “turn of the month” strategy presented here is very interesting for me.
It allows this credit line to be used more intensively for a short, defined period of time…
If you have further questions on the topic, I am happy to be reached via my email address.
Regards
Matt
Hi Matt,
Thanks again for your valuable input. I have been looking into some other potential twists to this and hope to write about it later.
Please keep on commenting – very valuable info you have.
Regards,
Oddmund