Sell in may?

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If you are buy and holder of stocks and shares this may be of interest to you. I am sure most have heard of ‘sell in may and go away’ but do the stats support such a claim? Apparantly so……..

“In an average year, the winter has produced a total return of 7.9%, compared with 2.5% for the summer months. But since 1950, US stocks have been through two long-term bull runs (around 1950-1966 and 1982-1999) and two bear markets (1966-1982 and an ongoing one that started in 2000).

Look at the seasonal pattern in the bear phases (so 1965-1982 together with 2000-April 2009) and it’s interesting to note that the May-October period is particularly “ugly”. The average return over this period is -0.3%, compared with 4% in the winter time. Yet another reason for caution.”
(Source: Moneyweek.com)

Sell In May

The reality is the “ugly” period is not too bad..it just doesn’t return very much. Therefore the question we should be asking is “will the cost of selling and buying back 5 months or so later be worth avoiding the 0.3% negative growth”. Maybe not. Don’t forget you don’t have to sell in may for the sake of it. Why not just not buy until the winter months. Alternatively you could wait for a dip in prices below the April close level to enter the market. Although, should the market continue straight on you could be left sitting on the sidelines.

As with anything in this trading game there are no right answers. It’s up to you to make your own decisions.

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