Sell in May and Go Away?

Sell in May and go away?

There is an old saying that goes “sell in May and go away”. The saying highlights how it is thought that over the summer stocks perform worse than in the fall and winter. Some credit this underperformance due to the fact that many people take vacations in the summer, while some even question the validity of the saying at all.

To test this phenomena I took monthly data from the S&P 500 since 1990. I took the average return of each month and plotted it on a graph. Just by looking at the graph it is tough to see much underperformance, however the average of May-October’s average returns is .44% while November-April’s is .94%. Thus there does seem to be something to the saying. For me the issue is that while there is underperformance on average, there are still solid gains on average. I personally would not want to miss out of these. Also if investing by this saying, you would be missing out on June, which has the fourth highest average monthly return.

While “sell in may and go away” has some truth behind it, there certainly are opportunities in the summer months.

Follow my Invstr page @robbieb for more analysis!

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