Investing word of the day: Ghost Month

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I know you are wondering why do we have a Ghost month in the stock market world and what is Ghost month anyways?

Investopedia.com says that Ghost month is a Chinese festival celebrated on the seventh month of the lunar calendar which usually falls on the month of August in the Julian calendar. To learn about this festival below is a short excerpt from Investopedia.com:

  

                                                                                       source: http://timesofmylife.wordpress.com

The Ghost Festival, also known as the Hungry Ghost Festival, is a traditional Chinese festival and holiday celebrated by Chinese in many countries. In the Chinese calendar (a lunisolar calendar), the Ghost Festival is on the 15th night of the seventh lunar month (14th in southern China).

In Chinese tradition, the fifteenth day of the seventh month in the lunar calendar is called Ghost Day and the seventh month in general is regarded as the Ghost Month (鬼月), in which ghosts and spirits, including those of the deceased ancestors, come out from the lower realm. Distinct from both the Qingming Festival (in Spring) and Chung Yeung Festival (in Autumn) in which living descendants pay homage to their deceased ancestors, on Ghost Day, the deceased are believed to visit the living.

On the fifteenth day the realms of Heaven and Hell and the realm of the living are open and both Taoists and Buddhists would perform rituals to transmute and absolve the sufferings of the deceased. Intrinsic to the Ghost Month is ancestor worship, where traditionally the filial piety of descendants extends to their ancestors even after their deaths. Activities during the month would include preparing ritualistic food offerings, burning incense, and burning joss paper, a papier-mâché form of material items such as clothes, gold and other fine goods for the visiting spirits of the ancestors. Elaborate meals (often vegetarian meals) would be served with empty seats for each of the deceased in the family treating the deceased as if they are still living. Ancestor worship is what distinguishes Qingming Festival from Ghost Festival because the latter includes paying respects to all deceased, including the same and younger generations, while the former only includes older generations. Other festivities may include, buying and releasing miniature paper boats and lanterns on water, which signifies giving directions to the lost ghosts and spirits of the ancestors and other deities. Read more here

As part of the tradition Chinese avoid unnecessary spending during this month and thus Asian funds do not have trading activity thus the price of stocks seems to go down. Since there is no new inflow of funds stocks either consolidate or go further down since no one is buying. 

For small investors whose aim is to stock up blue chips and fundamentally stable stocks and for those who are cost averaging it is the best time to buy when prices starts to go down. 

Ghost month for 2011 is from July 31 - August 28, 2011.