Tax Day should have been Apr 17 this year. But, the IRS has given taxpayers an additional day to file and pay returns after the webpage for paying tax bills using their bank account crashed.
Tax Day has always been special for the stock market. Estimates are that 15% to 33% of all tax filers wait for this day to fund their IRAs. After all, IRAs are a basket of various asset classes, including stocks in which individuals invest to prepare for retirement.
The average daily gain, by the way, for the S&P 500 on the Tax Day has been around 0.3% over the past 10 years. But, don’t dismiss 0.3% as meager because it is nearly 7 points on the S&P that equates to an annualized gain of around 75% over the average 252 trading days in a year.
The stock market, historically, tends to gain momentum in the two weeks following the Tax Day. Conversely, stocks tend to remain flat or somewhat down in the first two weeks of April. The S&P has been nearly down an average of 0.2% in the first two weeks of the month, while it was up around 1.7% on average during the weeks following the day, per data analytics firm Kensho. That’s a positive swing of about 2% on average for the S&P 500. Similarly, certain sectors like technology, financials, and industrials have notched average gains of around 3%, 1.7% and 2.2%, respectively.
Play the Tax Season With These 3 Mutual Funds
Given that the aforesaid sectors are poised to make the most of the upcoming bullishness, investing in mutual funds from the same will be judicious. And why not? Trump administration’s initiative to cut tax rates has provided the much-needed windfall to tech companies, while a recent move by the Fed to raise rates bodes well for financials. Firm business investment, in the meantime, helped factories expand at a record pace. Manufacturers are also on a hiring spree and are paying more than other jobs, reflecting sustained strength in the sector.
These funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds.
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