Sell in May and Go Away?

[Billy]

Billy, the proposal isn't sell in May and protect your gains, it's "Sell in May and reinvest in October". It is a strategy that identifies the two months of greatest average volatility, one up and the other down and assumes those two months will continue to behave in that same fashion.

Michael, That is you interpretation, perhaps you should read the interview then you would know what I am talking about.

The returns speak for themselves.

Regards,
Billy

 

[MichaelB]

Michael, That is you interpretation, perhaps you should read the interview then you would know what I am talking about.

The returns speak for themselves.

Regards,
Billy

Ok. Now I see. The original post and most of the responses to the thread, including mine, are about "sell in May and buy in October (or November). You are discussing a different strategy that is detailed elsewhere. If you care to post a summary of the strategy here I am happy to look at it, and others probably will as well.

Cheers, and hope you're feeling better.

 

[pb4uski]

During the past 10 years if someone had sold their entire stock portfolio on May Day and reinvested their entire stock portfolio on Halloween their annualized return in the Wilshire 5000 would have been 7% versus a buy and hold strategy of 5.4%......

I wonder if this is all in - that is, including dividends, interest on cash, transaction costs, taxes, etc. or just based on the change in indices themselves?

 

[Lsbcal]

Michael,
Transactions costs are so small now that I doubt they affect returns much. ...

I think Michael was referring to doing the study that shows how much better a sell-in-May plan has been. When doing backtesting of patterns the past existing scenarios should be included.

So if we go back to the 1950's we should be including (1) the tax scenario then, (2) the brokerage fees back then, (3) the investment instruments available then. For the 1950's through maybe the 1970's it probably would not be fair to assume one invested in the SP500 index, for instance, as there were no easy ways for retail investors to do that (I think). There were no-load mutual funds that could be switched out of with a telephone call but even no-loads were used by only a minority of retail investors. They might have had a bit higher ER on average to allow for the investor switching and the type of investor attracted to such a fund. Did the study consider these sorts of things?

BTW, I'm not at all opposed to market timing but few seem to have the statistics to back up their approach.

 

[Spanky]

Michael, That is you interpretation, perhaps you should read the interview then you would know what I am talking about.

The returns speak for themselves.

Regards,
Billy

This test: Simple Tests of Sy Harding’s Seasonal Timing Strategy
asserts this following conclusion:
"In summary, evidence from simple tests on available data for SPY does not support belief that Sy Harding’s Seasonal Timing Strategy is a compelling improvement over a buy-and-hold strategy or that the MACD signal refinement improves seasonal entry and exit."

 

[harley]

I prefer the "buy AAPL in 1987 and live in investor heaven" technique. Wish I'd followed it.

 

[Spanky]

I prefer the "buy AAPL in 1987 and live in investor heaven" technique. Wish I'd followed it.

This is a great story about people investing in Apple:
Apple's Once Unfortunate Investor, Now Multi-Millionaire | ValueWalk

 

[easysurfer]

I prefer the "buy AAPL in 1987 and live in investor heaven" technique. Wish I'd followed it.

Don't remind me. About my non-buy of APPL back when it was about $13/share.

At least now it's my biggest holding. Not directly, but indirectly via VTSMX.

 

[eytonxav]

I believe this strategy has to do with being in the market during its historically best months (Nov - April) and out from May - October which historically are the worse months. This certainly was not a good strategy back in 2009.

 

[Billy]

Spanky,

It’s good to see someone here took the time to do a little research on this before they responded.
Thanks.

The first thing I noticed in that back test was that they used SPY. Sy does not. I am not sure how much of a difference it would make, but just saying.

IMO, Sy’s strategy had a couple of off years due to the FED injecting sweetener into the markets at various times of the year. Perhaps this happened when Sy was in cash thus reducing his gains. I do not know. But the past is just that and we cannot change it. I am interested in future returns and my bottom line and after over three decades of investing and 22 years of being homeless and jobless, i.e. retirement, I am still here.

That said he produced the above returns while being out of the market 50% of the time and thus reducing risk, and this is not the only portfolio he runs.

Again, IMO we are still working off the effects of huge debt run ups by both the consumer and governments and have a few more years of these going nowhere markets. I hope I am wrong but in the meanwhile I want to profit from the opportunities both on the long and short side.

13 years….flat lining.
Or

Now I am going back to chanting with my Mayan friends on the shores of Lake Atitlan, Guatemala and discussing what if the world really doesn’t end December 21st 2012.

Regards,
Billy

 

[NW-Bound]

If there was a time that I wish I had "sold in May", it was last year. I was doing great gun, then while I went RV boondocking in the summer, the congressional budget debacle and the Greece situation caused me to lose 20%.

But, but, but looking at the above chart, I cannot help thinking that the seasonal market timing is small potatoes compared to the bigger multi-year market cycles. Of course, a buy-and-rebalance investor gets some of that too.

 

[pb4uski]

If this really works I wonder what would happen if one went long from Nov-May and then went short from June-Oct.

 

[EvrClrx311]

I've studied this a lot over the last few years and as other have eluded to already... it is one of those "who knows what it'll actually be like this year though"

There are plenty of other patterns you see besides the popular "sell in may" one... if you look at the overall market (DOW or S&P500, take your pick) you'll see that almost all of the return over the last 50 years has occurred in a 5 day period each month (the last 3 days of the month leading into the first 2 days of the next).... some have concluded that this is because people tend to invest the most during those periods of time (drip investing... or putting extra month left over from the monthly budget into stocks)

Accurate models exist that will show you that investing in the stock market for only 60 days out of the year while leaving your money in cash or money market accounts the other 300 days will give you a better return with less volatility... of course... trading costs money and there are buy/sell penalties as the spread, or trading friction, works against you (when you request to buy something, you typically pay more for it... and when you want to sell something you typically get less for it - simple supply/demand).

Computer models are fun... but they usually lead people to over-react to patterns they've seen in the past. This over-reaction is often more damaging than just staying invested long term and not messing with things...

Some people try to predict exactly when the sell in May will begin and try to get their money out before that drop... when others see the market falling they pile on and sell too causing a domino effect. Fact is... you never really know when/if it will even come...

trying to time the market is speculation at best... you are just adding unnecessary risk in doing so - risk that you might be selling at the bottom and sitting on the sideline during a recovery.

just my 2 cents...

 

[Nords]

I wonder if the sell in May rule applied to Hathaway, too.

The problem is that the annual meeting is in early May and insurance companies start gearing up for hurricane season in June. I'd think that either one of those would have a bigger effect.

Don't remind me. About my non-buy of APPL back when it was about $13/share.

We bought at $11 and sold at $15 because it looked like they didn't have a prayer after ignoring their core computer business to chase after this iPod fad.

Seriously, I think it's fair to say that most troubled companies have low stock prices for a reason.

 

[EvrClrx311]

Don't remind me. About my non-buy of APPL back when it was about $13/share.

At least now it's my biggest holding. Not directly, but indirectly via VTSMX.

life is full of

back in 2003 for a senior design class in my undergrad studies a group of 3 other students and I created what essentially could have been facebook, we called it Friendster (individual website profiles for user accounts that stored photos and life stories while linking each-other through friend requests)... we even went above and beyond showing how apps could be developed for cellphone to integrate into the system. The design as more advanced than what facebook would be for its startup phase as facebook mobile didn't come around until 2007. The name was a play off of napster (which is still pretty popular at the time)

We received an A+ for the course and the teacher recommended we submit the project for a national conference in Human to Computer Interaction (what this kind of thing was called before the phrase Social Media was coined)...

we took our A's and left for the summer without thinking twice about his advice to turn the project into something real... I forgot about the project entirely until late 2004, when I signed up for facebook and thought "interesting... this guy basically did the same thing we did, good for him. This is neat."



Some other future projects I decided to actually put out there and they've done well for me... guess you learn from your mistakes as you go



(also... it doesn't just take a good idea to make what facebook is today... Mark Z clearly has a business side to him that I lack. Most of what facebook is today is because of how it was marketed and the risks that were taken early on with raising capital for the project... things that we never would have done had we decided to turn our idea into a company...)

Plus, I would have just sold it for $10 million in its first few years and retired at the age of 25 - who needs that kind of stress?

 

[Spanky]

(also... it doesn't just take a good idea to make what facebook is today... Mark Z clearly has a business side to him that I lack. Most of what facebook is today is because of how it was marketed and the risks that were taken early on with raising capital for the project... things that we never would have done had we decided to turn our idea into a company...)

Plus, I would have just sold it for $10 million in its first few years and retired at the age of 25 - who needs that kind of stress?

Some people thrive on stress for whatever reason.

 

[Nords]

Some people thrive on stress for whatever reason.

And if it doesn't exist, then they go looking for it.

And if they can't find it, then they create some of their own to share.

 

[Retire Soon]

Should someone decide to "Sell in May and go away," this article gives ideas on what to do with all your new cash:

Where to go if you

 

[TromboneAl]

Sell in March and plant a larch.

 

[tulak]

Sell in March and plant a larch.

Darn. If I only I saw this a week ago. Is it safe to wait until next March?

 

[Dennis]

And you really expect someone that Has made that work tell you?
It would defeat their purpose -Any proven System has to be kept secret, for if enough do it? It won't work, right?

I served the Financial Industrty for 30 yrs in the Limo Business and had just about everyone on the Planet "In the Back Seat" of my Limo Several Times over the yrs..

I learned their was only one way to Make $ on Wall Street and that was " OPM- Getting others $ to give it to you for selling them your services..and Gamble using OPM.. their $, while you put yours in Bonds and Real Estate..

You really think Jack Boggle got so rich investing His Own $?
I just put mine into The "Poor Mans" investments and that is using Balanced Funds.. They are just like hiring a FA to invest your $ for you.. Own 3-5 of different kinds and you have things covered.. Key is? You have to put Enough into them to make it worthwhile..! What good does making 10% apy do you , if you Need to have $1 Million to Retire on , but you can only Save $5k yr? Everything is Relative.. :-(

 

[Dennis]

Nice Looking at all those Past Performances and what $10 Grand is worth today, isn't it?
-Only one Problem? Who had $10k to Invest into something like that some 20-40 yrs ago?
-If you were lucky back then? You maybe had a Total of $10k and you shirley didn't Invest it all into One Thing! You diversified and had a Balanced Portfolio..
Maybe 10% in each at the most.. So take 10% of it and 90% of the rest being in Everything else and see where you'd be by now..

And you'd have to invest at least 20% in a Stock fund that does +5% more than everything else, to make even 1% apy more after ? 18 yrs.. and who keeps an Investment that lone? Not too many..

 

[MichaelB]

Sell in March and plant a larch.

Still too soon to buy in June?

 

[M Paquette]

Any proven System has to be kept secret, for if enough do it? It won't work, right?

Yup. Any widely known system gets optimized away by the market. Since "Sell in (early) May" has worked pretty well the last couple of years, I fully expect the trading types to jump in even earlier this year, triggering a drop in April that will product the usual short term stampede for the exits, and producing a good short term buying opportunity by May.

But that's just cynical me. I personally know what the combination of frictional losses,taxes, and the risk of having to make two accurate timing decisions (out and in) would do to my portfolio, so I'll just be one of those (lesser) fools buying and holding, whilst munching my popcorn and observing the market timers.

 

[MichaelB]

Since "Sell in (early) May" has worked pretty well the last couple of years, I fully expect the trading types to jump in even earlier this year, triggering a drop in April that will product the usual short term stampede for the exits, and producing a good short term buying opportunity by May.

Sell in April, or it could be fatal?