David Morrison, senior market strategist at Spread Co, says Yes.
Most “golden rules” for successful investing are little more than lazy clichés. If you try to simultaneously follow pearls of wisdom such as “it’s never wrong to take a profit” and “run your winners, cut your losers”, you’ll end up chasing your tail.
But a 2012 study by Sandro Andrade, Vidhi Chhaochharia and Michael Fuerst of the University of Miami shows that “sell in May and go away” is pretty solid advice – and not just in the US or UK, but across 37 different markets. They show that between 1998 and 2012 average half-year equity returns were over 10 per cent between November and April, but less than 1 per cent between May and October.
As the authors point out, the effect is persistent. There’s no single explanation for the difference in performance but the stats are in. And they confirm that the best stock market returns come in the few months at either end of the year – not over the six in the middle.
George Salmon, equity analyst at Hargreaves Lansdown, says No.
With the United Kingdom set to go to the polls in early June, the old stock market adage that investors should “sell in May and come back on St Leger’s Day” might seem particularly tempting this year. However, history tells us that following this old stock market saying can cost you dearly.
Looking at data stretching back as far as January 1986, when the FTSE All Share Total Return Index was launched, selling at the beginning of May and buying back at the beginning of September has avoided market falls in just 12 of 31 years. Indeed, from a £10,000 base, following the adage year-in year-out would have left the average investor more than £60,000 out of pocket over the same period.
It is of course impossible to know what lies in store this year. But I for one have always been more of a fan of a different market adage: “time in the market is better than timing the market”.