Historically, the month of September tends to be the worst month of the year for investing. Here’s why:
Hedge Funds are largely compensated based upon their investment returns. If a hedge fund is having a good year and showing a nice profit. The hedge fund manager may decide to lock in their gains before year end. This way they know that they will receive a nice bonus check at year end. Basically, they just sell out everything and sit out the rest of the year.
There is an enormous amount of money controlled by such hedge funds and like institutional investors.
Their selling brings down the major indexes. This appears to be the case once again this year. Literally, the day after the big Alibaba IPO hit the markets – the selloff and ensuing volatility began.