(ThyBlackMan.com) The conventional wisdom is that the price of a stock will rise and fall based on the performance of the company of that stock. But is this really true?
The reality is that the performance of the stock market has a lot more to do with expectations. This is only one reason why the stock market is so volatile, and it’s why the anticipation builds up significantly when a major company prepares to announce their quarterly performance
Ultimately, the price of a stock will rise or fall depending on the performance of the company against the expectations of that 
company. Even if a company were to earn a profit of five hundred million dollars in profits, if it were expected by analysts to have earned six hundred million, then the price of the stock of that company would fall.
All of this is why stocks tend to perform better or worse depending on certain times of the year, because there are certain months or seasons where expectations are higher or lower. The result is that investing in stocks based on season rather than actual company performance is a strategy that many investors take, and it’s why paying attention to seasonal stock trends is important.
Here are the top tips for investing in seasonal stocks:
Sell In May and Buy In September
Generally speaking, stocks will rise in value from November through April, but underperform from May to October. This is why many investors will sell several of their stocks in May when they are at their peak, and then buy again in September before the price of the stocks shoots up again.
This pattern has been observed since the 1950s, where the average gain of stocks from November through April is over seven percent, but from May through October is less than one percent. The main reason for this is because there is significantly less trading volume during the summer, as people are spending more time on vacation, while the volume increase significantly again during the fall and winter when everyone is back home.
Some Stocks Show More Seasonality Than Others
While it is true that most stocks tend to underperform during the summer and then rise again in the fall and winter, this doesn’t mean that all stocks perform this way.
Some stocks show far more seasonality than others. For example, stocks in the banking, health care, and retail industries tend to be more seasonal.
Stocks Tend To Rally In The Winter
There are many reasons why stocks tend to rally during the winter months, specifically around Christmas time. People tend to be more optimistic during the holidays, the short sellers are on vacation, and people are making tax related adjustments to their portfolios at the end of the year.
Regardless of how you personally decide to invest in stocks, it is important for you to be aware of the basic seasonal patterns so you are better prepared to make wiser investing decisions depending on the time of the year.
Staff Writer; Todd Love