Sell in May and Go Away

Now that May is here and my seasonal allergies are in full bloom with the flowers, those of you who frequent investment reading surely see articles mentioning the fabled “Sell in May and Go Away” adage.

This idea came about using hindsight and noticing that if you missed those 6 months (May to November) in the market you would have missed some of the worst crashes in history. Notably the fall into the Great Depression, Black Monday, and most of the pain from 2008. Hey, hey, someone finally figured it out. Not quite.

Oppenheimer Funds recently put up a great article that helps to debunk this theory.

They highlight one key principle for the long term investor: missing the good days can be as harmful for returns as experiencing the bad ones. The two charts below from Morningstar show the one-two punch of the effect of not participating in up markets and then put that into context with the chart to the right showing what the “Sell in May and Go Away” philosophy would have actually done to returns since 1926.


Source: This is a hypothetical example and is for illustrative purposes only. No specific investments were used in this example. Actual Results will vary. Past performance does not guarantee future results. Does not take into account taxes or fees. All investments are subject to risk including the risk of loss

As you can see, over time, missing those downturns may have cured some insomnia, but repeatedly missing gains every other year proved to be a much bigger detractor than those crashes. Gimmicky investing like this works until it doesn’t. Time and numbers have shown us repeatedly that staying the course with your investments produce the most repeatable results.

All the best,

Wesley R. Nicholson, Mike Allen and Aaron Everdyke

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