How Seasonality Beats Buy-and-Hold in 2025

Editor's note: Many investors rely on passive strategies like index funds. But Keith Kaplan, CEO of our corporate affiliate TradeSmith, explains that there's a smarter, more targeted way to make money and sidestep volatility. Adapted from the TradeSmith Daily free e-letter, Keith details how one breakthrough can help investors avoid long slumps and potentially double the market's returns – by focusing only on stocks with the best odds of outperformance.

Imagine you're in the year 1850, driving down a dusty old road on a horse-drawn carriage.

The leaders of your team are strong... But more than half the horses are sick and weary. Taken together, you're cruising at an acceptable pace.

Suddenly, you hear the thunder of hooves. You look over your shoulder and spot a cloud of golden dust rising against the sky.

Another driver quickly passes you. The man at the reins is riding a carriage in just the same shape as yours... with the same haul.

The key difference is that the horses pulling his carriage are all prized stallion thoroughbreds in the prime of their lives, all at a full gallop.

Some time later, you catch up to the man. He's parked in front of a barn, resting his team.

You call out, "Why waste the time? I'll run another 5 miles by the time you're back on the trail!"

"I can cover 5 miles at twice your pace," he calls back. "I can well afford this rest."

Sure enough, you're eating his dust half an hour later.

Here's why I'm telling you this story...

The first carriage is like buying and holding an index fund in the stock market.

Often, you're being pulled forward by just a few strong stocks – like the Magnificent Seven of the past few years.

But when those horses falter, like in the 2025 crash, all through 2022, early 2020, and 2008... the ride comes to a grinding stop.

The second carriage, on the other hand, is like using the new investment strategy we released at TradeSmith at the start of this year.

Using it has led to returns that have on average doubled the S&P 500 Index since 2006. Not only that, it has completely avoided any prolonged stretch of losses over that entire span.

Let me show you how it works...

How Seasonality Helps Us Beat the Market

Our seasonality breakthrough has to do with an incredible innovation we've made.

This software helps you optimize the market's moves by keeping you in only the stocks with the best chance of rising, faster than the market, at any given time.

Seasonality is the practice of averaging past price data to make effective projections about the future.

For example, take a look at the seasonality data for video-streaming giant Netflix (NFLX) in the chart below.

We made a big call on NFLX as part of our launch presentation for this breakthrough back in January. Using the past 15 years of NFLX prices, we were able to confidently project that NFLX would rally hard from January 17 to April 17...

Our data showed an average return of 23.8% over that period, with gains 93.3% of the time.

NFLX wound up surging, just as we projected. It ended that three-month period up 13.4%... while the S&P 500 lost 12%.

It didn't quite make the historical average return. But for a year marred by tariffs, trade deals, global conflicts, and other chaos, we can't complain about holding a stock that rallies as the benchmarks sell off.

We got another signal in January as well. This time, on the world's most valuable company, Nvidia (NVDA)...

From January 26 to February 20, NVDA has historically traded positive 14 of the past 15 years (93.3%). In that span, it posted an average return of 9.2%...

This year, though, NVDA did even better. Through that same seasonal period, NVDA rose 18.3%.

But this isn't all we've done with seasonality at TradeSmith...

The Breakthrough

Six months ago, we debuted our Seasonal Edge strategy.

With it, you trade only the 50 stocks with the strongest seasonality patterns during the upcoming year. You buy these stocks during their best seasonal periods, then sell once that period ends.

Rinse and repeat as those same 50 stocks come into their best trading windows, based on seasonality.

Additionally, you look for stocks that haven't run too far, too fast in the short term. That ensures you're only running with a team of "well-rested horses."

Remember, people who own index funds and "set it and forget it" wind up with predictably average returns. They're running teams of horses of wildly varying effectiveness.

The new seasonality strategy does better...

Like an active investor, you focus on a specific group of stocks – but you ONLY trade the stocks when their historical data provides a ton of evidence that it's the best time to hold them.

We ran a rolling test of this strategy from 2006 to 2024, with each year testing the previous 15 years of price data for more than 5,000 stocks.

And this trading strategy yielded a total return of 857%... with performance that doubled the S&P 500 on average every single year.

Even more impressive is the fact that this strategy never lost money for long. You can see on the chart below how the seasonality strategy would have broken away from the benchmark in 2008 and never looked back...

This strategy rejects everything except the fastest, strongest horses with the best track record at any given time.

When you use it, you're happy to switch up your team every so often... because you're getting where you want to go faster and more efficiently.

If that's not a better way of investing, I'm not sure what is.

Once you see how this tool works firsthand, on your own stocks, my hope is that you'll realize how powerful investing this way is.

All the best,

Keith Kaplan

Editor's note: Until July 22 at 10 a.m. Eastern time, you can test drive the powerful tool behind TradeSmith's "green day" investing breakthrough... a system that pinpoints the exact days 5,000 stocks are most likely to surge, with 83% accuracy. Since January, it has helped deliver gains of nearly 250% in roughly two weeks. And by registering for TradeSmith's upcoming webinar – which will share all the details – you can try the system for yourself.