By: Christian Hudspeth of Street Authority
The most recent election was a good night for Republicans, but possibly even better for investors.
That's not necessarily because Republican wins lead to better stock returns, but because historically the market performs better in the year following midterm elections.
In fact, there's a 66% chance that the market will post positive gains for 2014, according to research by StockTradersAlmanac.com.
Looking at stock market movements from every midterm election from 1970 to 2010, their research found that 66% of the time the stock market ended higher from election day to year's end.
And for all midterms since 1970, the stock market gained an average of 2.1% from election day to the end of year. You can see for yourself in the table below:
If a 2.1% gain possibility over the next two months doesn't sound groundbreaking, then this might.
Holding stocks for a full year after a midterm has historically been very profitable, according to research by Chief Equity Strategist Sam Stovall of SP Capital IQ.
Since 1946, there have been 17 midterm elections. As this article points out, Stovall's research shows that in each of those cases, from October 31 of the midterm year through October 31 of the following year, the SP 500 gained an average of 17.5%. And in every single one of those post-midterm periods, the market has never ended lower.
This no doubt would be welcome news for investors over the next few months, if history repeats.
But here's another important find that will help investors improve their stock market returns for the long haul.
Earlier this week in an issue of Dividend Opportunities, we mentioned how our Top 10 Stocks expert Dave Forest just finished his latest research, which he recently revealed to an audience at St. Edward's University.
After pouring through years of historical studies, he found that the key to consistently beat the stock market is much simpler than you might think.
As he said in his presentation, the key to outperforming isn't timing the market or trading on a daily, weekly or even yearly basis.
The research showed a clear trend: In general, the longer you hold an investment, the higher your chance for success.
As Dave pointed out, a recent study by mega-investment firm Oppenheimer showed that since 1950, the SP 500 has never suffered a loss over a 20-year period.
Dave went on to explain:
"When I started preparing for [this] presentation, the first thing I did was go through the annual results of the SP, going all the way back to 1950.
Here's what I found...
On a rolling annual basis, the SP has dropped 16 times over a 1-year period since 1950... but zero times in any 20-year period.
This trend is clear as day. The longer you hold an investment, the better your chances of making money...
And the nice thing is, if you hold the right stocks, you can even hold them through a market crash and not get crushed."
Dave's Top 10 Stocks research team, which first released its list of "The 10 Best Stocks To Hold Forever" back in July 2011, has already seen proof of this.
By buying solid "Forever" companies with three unique traits and simply holding on, the team has seen its 10 original Forever Stocks beat the market by as much as 85 percentage points, increase their dividends by up to 633% and, in some cases, do so with less volatility than the market.
And there's more success to be had from this strategy.
Dave will be revealing a new, never-before-seen list of Forever Stocks this week. Like the original list, the 10 Forever Stocks he's found carry three distinct qualities, which have helped them deliver average gains of 829% over the last decade and beat the SP by a more than 7-to-1 margin.
And thanks to their unique characteristics, Dave expects them to do very well in the years -- and even decades -- to come.
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