At Elson Associates, it is important to us that you stay informed, so this week we thought we would talk about the old age adage "Sell in May and go away".
What does it mean and where did originate from?
"Sell in May and go away" is a well-known adage that warns investors to sell their stock in May to avoid any seasonal declines that the equity market may experience. In essence, the strategy promotes selling stocks in May and re-purchasing them in the Autumn, October or November.
It is said that the phrase originates from an old English saying "Sell in May and stay away, and come back on St Leger's Day" referring to the custom of merchants and bankers who were inclined to leave the city of London to escape to the countryside, fleeing from the heat of the summer months. St Leger's Day refers to St Leger's Stakes, a thoroughbred horse race event held in mid-September.
Should I listen to this advice? What does the data say?
Around this time of year, many pundits draw attention to this phrase as a warning about the potential of depressed stock market returns during the summer months.
So, what does the data say? Well, according to Fidelity, since records began in 1928, the S&P 500 Index has gained roughly 5% on average from November through to April and an average of 2% from May through to October, indicating that on average, stocks have not performed in summer months as well as in winter months.
What do I need to consider? - Elson Associates - Investment Management Services UK.
- According to the data, stocks have still gone up on average in the summer months.
- If you choose to cash out during these months, in the long run you could lose out on potential positive returns as well as the compounding effect these returns may have on the overall portfolio growth.
- In order to follow this strategy, you will need to find an alternative that effectively offers better returns than stock during this period. Transaction costs and tax implications should be also considered when selling your stock investments.
For Long-term investors, "Sell in May and go away" is therefore probably best avoided.
Nevertheless, that doesn't mean you shouldn't use this 'quieter' period for your investments as an opportunity to review your portfolio, reassess your investment strategy, monitor performance of your current investments and plan for the future.
Our services will help you achieve your goals, boost your investments and we'll keep you informed throughout the process. If you would more information on how we can help you, contact us today via our contact page click here, or call us on 0800 0961111. Elson Associates, Investment Management Services that you can trust.
Please note: Elson Associates does not offer advice as to the suitability of investments. The value of investments and the income from them can go down as well as up and you may not get back the amount invested.
Sources: http://www.investopedia.com/terms/s/sell-in-may-and-go-away.asp, http://www.kansascity.com/news/business/personal-finance/article150753347.html