Equity funds have become a favoured investment instrument because they save investors from having to select individual stocks. Additionally, investors benefit from diversification that otherwise would not be possible for them because of a lack of adequate capital.

Because equity funds contain various stocks, such as those of a specific sector, itís worth examining the seasonal trend of an individual fund. However, if possible the seasonality of an applicable index should also be considered as very often a fundís historical database is small and does not date back far enough.

Nevertheless, please remember our risk disclaimer. Even professionals find forecasting stock price movement difficult. Seasonal trends can only be a forecasting aid. The many other factors influencing the stock market must also be considered, such as changes in interest rates, company profits, and general market sentiment. Used sensibly, seasonality should account for about 10% to 25% of factors weighed in an investment decision.