Sell in May
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I've never heard of this practice. What's the reasoning behind "sell in May"?
SecondCor521
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Nope. I think all of those timing adages are always in the process of being arbitraged away. If it's sell in May, there are people selling now in late April before the May drop in stock prices. Same thing with the Santa Claus rally, presidential cycles, 50/200MA and pretty much all technical analysis.
And then there are years where the rule just doesn't work. I think selling in May worked OK last summer, but it would have been a horrible idea in the previous seven summers. (I was looking at the S&P 500 between 5/1 and 8/1 each year.)
And then there are years where the rule just doesn't work. I think selling in May worked OK last summer, but it would have been a horrible idea in the previous seven summers. (I was looking at the S&P 500 between 5/1 and 8/1 each year.)
audreyh1
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No, I don’t jump in and out at all. I’ve got better things to do with my life.
lawman
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I'm thinkin for everyone who thinks May is good time to sell there has to be one who thinks May is a good time to buy..
OldShooter
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Not only a waste of time but likely a waste of money.
See: Taylor Larimore's market timing quotes https://www.bogleheads.org/wiki/Taylor_Larimore's_market_timing_quotes
That’s a good point.
frayne
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I couldn't resist posing the question to ChatGPT for a little historical context.
"The adage "sell in May and go away" is a well-known investment strategy that suggests investors should sell their stock holdings in May and avoid the stock market until November, when they should re-enter the market. The idea behind this strategy is that the stock market tends to underperform during the summer months, while the winter months typically see stronger market returns.
The origin of the phrase is not entirely clear, but it is thought to have originated in the UK in the early 20th century, when wealthy investors would leave the city for the summer months to escape the heat and engage in leisure activities. The strategy was popularized in the 1980s and 1990s by investment analysts who noticed a seasonal pattern in stock market returns.
However, it is important to note that the "sell in May and go away" strategy is based on historical patterns and is not a guaranteed way to make money in the stock market. While there may be some truth to the idea that the stock market tends to underperform during the summer months, this is not always the case. Additionally, the strategy assumes that investors will be able to accurately time the market, which is notoriously difficult to do.
Ultimately, whether or not "sell in May and go away" is a good investment strategy depends on an individual's investment goals, risk tolerance, and overall investment strategy. It is important for investors to carefully consider their investment decisions and consult with a financial professional before making any major investment decisions."
"The adage "sell in May and go away" is a well-known investment strategy that suggests investors should sell their stock holdings in May and avoid the stock market until November, when they should re-enter the market. The idea behind this strategy is that the stock market tends to underperform during the summer months, while the winter months typically see stronger market returns.
The origin of the phrase is not entirely clear, but it is thought to have originated in the UK in the early 20th century, when wealthy investors would leave the city for the summer months to escape the heat and engage in leisure activities. The strategy was popularized in the 1980s and 1990s by investment analysts who noticed a seasonal pattern in stock market returns.
However, it is important to note that the "sell in May and go away" strategy is based on historical patterns and is not a guaranteed way to make money in the stock market. While there may be some truth to the idea that the stock market tends to underperform during the summer months, this is not always the case. Additionally, the strategy assumes that investors will be able to accurately time the market, which is notoriously difficult to do.
Ultimately, whether or not "sell in May and go away" is a good investment strategy depends on an individual's investment goals, risk tolerance, and overall investment strategy. It is important for investors to carefully consider their investment decisions and consult with a financial professional before making any major investment decisions."
Thanks for the background info.
I am a buy-and-hold investor and not into market timing. I am happy to collect the historical 7% average annual returns or whatever because it's easy and I am lazy, and whatever extra returns I might eke out of a strategy such as "sell in May" just doesn't seem worth the extra effort and risk, not to mention I would have to get the timing right TWICE (to jump out and jump back in).
Let's say a retail investor has USD $1 million in equities. He decides to do the "sell in May" strategy, but he's not going to risk his entire portfolio. Let's say he liquidates USD $200k. He times it perfectly on the exit and then on re-entry, and manages to earn an extra 2%, 3% or whatever on his $200k by the end of the year. So for doing everything right, he might end up with an extra $4k or $6k or whatever. Is it worth all that trouble and risk just to earn extra few grand?
It's one thing if a pro does it (that's his job) or if a retail investor who enjoys the chase for the thrill of it to do this. I get that. But an average retail investor on this forum who is prudent is not going to play this market timing game with his entire portfolio, and if he's just doing it with a small part of his portfolio, even if he gets everything right (and that's a big IF), the returns simply won't be big enough (IMO) to warrant going through all this effort just so he can earn an extra 4 figures or low 5 figures (not to scoff at the amount, but I doubt that's going to make a meaningful difference to an average retiree on this forum).
So, all this just seems a lot of work (and risks) to earn extra relatively paltry returns vs. just sitting back and collecting the sure thing of average 7% historical returns.
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VanWinkle
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marko
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A "sure thing" in investing makes me nervous. Historically, yes, but........"past performance etc etc"
IMO, we may be entering a different dynamic than the past 15 or 20 years. Hoping I'm wrong. I usually am.
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COcheesehead
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Yes, the longer the time frame, the more it’s a sure thing, but some of us don’t have a longer time frame so it’s a maybe.
I have not used it as a timing method myself (I have my own "look out below" indicators + my very astute brain which helps, heh heh. I feel better about moving money when The Market is telling me something and not by looking at the calendar or the clock or a weather vane) but I did read Sy Harding's book "Riding the Bear" where he explains his refined Seasonal System. (It involves 16 Oct, 20 April and a MACD crossover) The details can be found in various articles on the web as Sy Harding died almost 10 yrs ago I guess.
It has been shown to be effective and more productive than B&H on a risk adjusted basis. How much is enough? That's for The User to decide. As far as triaging out the efficacy of these systems? My view: Most have been known for over 100 years. Not too likely all of a sudden the past 2-5-10-20 years people have been jumping on the bandwagon and dissipating their effectiveness. There are too many other "systems" and concomitant resistance to them. IOW: People are doing what they always do, which is to say "never ONE thing."
Hulbert used to rank lots of these systems and newsletters, and Sy Harding's was always one of the highest rated ones. Like any timing system it doesn't hit the mark every time (just like B&H) but you can't lose big either. That's what they're for. But they usually let you sleep better during times of tribulation
It has been shown to be effective and more productive than B&H on a risk adjusted basis. How much is enough? That's for The User to decide. As far as triaging out the efficacy of these systems? My view: Most have been known for over 100 years. Not too likely all of a sudden the past 2-5-10-20 years people have been jumping on the bandwagon and dissipating their effectiveness. There are too many other "systems" and concomitant resistance to them. IOW: People are doing what they always do, which is to say "never ONE thing."
Hulbert used to rank lots of these systems and newsletters, and Sy Harding's was always one of the highest rated ones. Like any timing system it doesn't hit the mark every time (just like B&H) but you can't lose big either. That's what they're for. But they usually let you sleep better during times of tribulation
target2019
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It's a nice thought. You can find data to support or refute timing rules.
Institutions usually address these things:
https://www.fidelity.com/viewpoints... stock market,has been November through April.
On average it might work, but there's a chance we could have succesive summers where above-normal growth occurs.
Do you feel lucky?
Montecfo
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How can it be arbitrated away when you folks all discount it?
Seriously, I am aware of it but it never seemed certain enough to try to exploit. I do recall also knowing November to April being the seasonally stronger time for financial markets, mainly due to fund flows.
At present I think the market is being affected more by Fed actions than anything else. Directional results may be the same i. e., "Should have sold in May before the downturn".
Seriously, I am aware of it but it never seemed certain enough to try to exploit. I do recall also knowing November to April being the seasonally stronger time for financial markets, mainly due to fund flows.
At present I think the market is being affected more by Fed actions than anything else. Directional results may be the same i. e., "Should have sold in May before the downturn".
Sure but that's already baked in the cake and the results. Here and there along the way, even with B&H, there's potential for egg on one's face.
Andre1969
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I think the old "Sell in May and Go Away" trope works about half the time. Sort of like market timing. Which means, the other half of the time it doesn't. So the failures probably cancel out the successes.
Now, I have noticed that it seems like when the stock market does well, it tends to get a good deal of the run-up either early in the year or late in the year. Summer is often a bit mundane in comparison. But, I don't think that the market in September or October, or whenever it is you're supposed to buy back in is consistently lower than it was in May, when you're supposed to sell. Especially, if you factor taxes into the equation.
Looking back, I can think of plenty of summers where the market was down pretty seriously. But, it was never consistent of when it went down, when it came back up, and the months of May and Sept/Oct or whatever were never really a factor.
Now, I have noticed that it seems like when the stock market does well, it tends to get a good deal of the run-up either early in the year or late in the year. Summer is often a bit mundane in comparison. But, I don't think that the market in September or October, or whenever it is you're supposed to buy back in is consistently lower than it was in May, when you're supposed to sell. Especially, if you factor taxes into the equation.
Looking back, I can think of plenty of summers where the market was down pretty seriously. But, it was never consistent of when it went down, when it came back up, and the months of May and Sept/Oct or whatever were never really a factor.
