Stop investing at the wrong time: Find out when to buy ETFs

It's happened again.

Shortly before work you filled up your car for $3.79 per gallon.

On the way home you could have had the gasonline 10 cents cheaper.

It's the same in the stock markets. In addition to choosing the right ETF, you can buy an ETF that is too expensive or at the cheapest market price.

Not every time of the day, every day of the week, or every month is suitable for making your investments.

For example.

Would it be optimal to invest in an ETF on the DAX or the MSCI World or the S&P 500 Index from the USA on February 1st, 2022?

No.

Performance over 2022 shows that no ETF was profitable.

When is the best time to buy an ETF?

I will answer this question for you fully in this article.

#1: When is the best time to buy an ETF?

Over the course of the day, the best time is when there is the most trading volume. That is, there are many buyers and sellers at any given time. With a high trading volume, the difference between the bid and ask price (bid-ask spread) is the smallest. This means that you buy the ETF at the cheapest price.

The highest trading volume occurs when the exchanges your ETF trades on are open.

When does the stock market open?

Since September 2021, the German stock exchange in Frankfurt (XETRA) has been open until 10:00 p.m. to align with the trading hours in New York. However, liquidity is significantly lower after 5:30 p.m. I therefore recommend that you carry out your transactions before 5:30 p.m. German time.

For the sake of completeness, here is a list of the stock exchange opening hours (GMT+1 / London time):

• Tokyo (TSE) ➤ 00:00 - 02:30 and 03:30 - 06:00

• Shanghai (SSE) ➤ 01:30 - 03:30 and 05:00 - 07:00

• Hong Kong (HKEX) ➤ 01:30 - 04:00 and 05:00 - 08:00

• Amsterdam (EuroNext) ➤ 08:00 - 16:30

• Frankfurt (XETRA) ➤ 07:00 - 21:00

• London (LSE) ➤ 08:00 - 16:30

• New York (NYSE & NASDAQ) ➤ 2:30pm - 9:00pm

Note: Opening hours may vary depending on the country, especially in the weeks before and after the time change.

#2: When is the best day of the week to buy an ETF?

Statistical evaluations are necessary to determine the best day of the week for an investment. Large investors who need to invest money regularly create short-term patterns.

One of these patterns is known by the saying "Turnaround Tuesday". There are some studies and back tests on this effect that show that Tuesday is a particularly good day to be invested.

Why Tuesday?

Bad news is often published on Fridays, after the market close or at the weekend. As a result, small investors sell in a panic and prices fall. On Tuesday, the market digested the bad news and major market players are taking advantage of the lower prices to add to their positions.

Therefore, after a very weak Monday, there is often a significant price recovery on Tuesday. This phenomenon can also be proven in back tests. Here, a position in the S&P 500 Index Future was opened every Monday shortly before the market closed and sold again on the following Wednesday immediately after the market opened.

The test results since 2009 show that this strategy is profitable and you can therefore also use the principle for your long-term ETF savings plan.

This is how you do it: Buy your ETFs or ETF savings plan on Monday evening just before the market closes.

This setting is probably not possible with your online broker, because most execution dates can only be defined according to a specific date and not according to a weekday.

Read on for the best time of the month. I will also show you how you can protect your capital from the next stock market crash.

#3 When of the month to buy an ETF?

Statistically, stock markets go up most of the time. It therefore makes sense to invest your money as early as possible. Jan Taubitz has made a statistical evaluation of an ETF savings plan for the last 10 years on his finance blog.

In principle, the first investment days (green bars) show the best performance. But an ETF savings plan executed on the second trading day of the month has the best performance.

Why is that?

The stock markets have mostly risen in the last 10 years. They haven't lived through years of financial crises or years of sideways markets.

For this period of time the saying has been true:

“Time in the market beats timing the market.”

And what was before that?

From 2000 to 2010, financial crises rocked the stock markets.

Can such years be repeated?

Sure.

You can protect yourself from such crisis.

Read more to find out how.

#4: When is the right time to buy an ETF on a yearly basis?

“Sell in May and go away, but remember to come back in September”.

This proverb describes the seasonal trends.

InsiderWeek has developed a free tool that you can use to evaluate seasonality in different time periods.

In the graphic you can see the seasonal development of the DAX Index over the last 5, 10 and 15 years. There is a seasonal weak phase from mid-February to the end of March and a strong phase at the end of the year in October, November and December.

Treat such seasonal patterns with caution, as they only show an average view of the past. This does not mean that they will also occur in the future.

If you are facing a major one-time investment, this could be another piece of the jigsaw puzzle for when to invest.

When exactly are you starting?

According to the seasonal pattern, the two low points at the end of March and the beginning of October with subsequent stable upward trends are suitable for larger one-off payments. Above all, the upward trend at the end of the year has a very high probability of occurrence. There is also talk of the year-end rally.

When making your investment decision, pay attention to other indicators, such as the inloopo stock market indicator.

#5: Buy ETF and protect capital

For as long as the stock markets have existed, they have been rising. However, investors are confronted with stock market crashes and years of sideways movement. In these phases you make losses. In order to protect my investments from stock market crashes in good time, I have developed my own stock market indicator, which shows me a fundamental analysis of the stock markets (S&P 500 Index) every Sunday.

If you combine these traffic lights with simple entry and exit rules, you will lose less and make more money.

In short: You can optimize your investment decision with a quick look at the inloopo stock exchange traffic light.

If the inloopo stock exchange light is red, you have to wait and switch to capital protection mode.Personally, I have an active stop-loss management for all my investments , which protects me from large falls in capital.

If the inloopo stock exchange light is green, you can make your investments with a better conscience, because the fundamental analysis of the S&P 500 is positive.

Summary

This article aims to give you a broader view of when is the best time to buy an ETF.

1. You now know when is the best time of day to do this. ➤ 2:30 p.m. – 4:30 p.m. London time. For US investors at any time at New York stock market opening hours.

2. When is the best day of the week to do this. ➤ Monday shortly before the market closes.

3. Why it makes statistical sense to carry out your savings plans at the beginning of the month.

4. What seasonal patterns there are in the financial markets and where you can look them up yourself.

5. And how you can optimize your ETF savings plans with a quick look at the inloopo stock exchange traffic light.

I wish you success in the financial markets, because your money is your freedom. 😊