It’s hard to shake the spectre of “Black Monday” when, on 20 October 1984, a market crash with its origins in Hong Kong rippled West and the FTSE dropped almost 13 per cent in a single day. Worse yet was “Bloody Friday” – 24 October 2008 – when many of the world’s exchanges saw the worst declines of their history with drops of around 10 per cent.

According to fund expert Adrian Lowcock, October’s reputation for volatility is well-earned. However, a little uncertainty shouldn’t spook investors. He says: “While October is the most volatile month for stock markets – volatility in terms of daily returns picks up in September and peaks towards the end of October – in recent years it has been a good month for investors. In spite of its volatility, it’s actually the fourth best-performing month in the year.”

Jason Hollands of Tilney Bestinvest concurs. October has been a down month just 25 per cent of the time since 1986, he says, compared to 46 per cent for September. He explains: “September has historically been the principle ‘danger’ month. It has delivered the worst average returns, in large part due to a number of major sell-offs since 1986.”

These sell-offs include the second dot com bubble in 2002, when the FTSE fell by 21.2 per cent, and a 13 per cent drop triggered when Lehman Brothers filed for bankruptcy on 15 September 2008, the same day that the US bailed out AIG. The FTSE fell 10.9 per cent as recently as 2011, when the European debt crisis triggered a sharp sell-off.

Hollands does point out several reasons to be wary in the short term – including the spectre of interest rate rises and a slew of geopolitical crises like protests in Hong Kong and the situation in Ukraine – but points out that short term corrections are virtually impossible to predict.

He says: “Recently we saw quite a sell-off in Europe as investors have been underwhelmed by the actions taken by the European Central Bank to stimulate the Eurozone and tackle withering inflation. Whether this extends to a more prolonged slide remains to be seen.

“That said, successful investing is ultimately about buying low and selling high, so if October does turn out to be a month of declining markets, it will be an opportunity to buy rather than sell.”

Lowcock adds: “Investors should not avoid the month of October. In spite of its well-earned reputation for volatility, stock markets are usually up by the end of the month. However, it is good to be prepared and if there is any sell-off investors should look to act quickly to take advantage and invest new money on any dips as they tend to be short lived.”

Source: Tilney Bestinvest