Sell in May and Go Away? Not So Fast

Riepe, Mark W.
July 2003
Journal of Financial Planning;Jul2003, Vol. 16 Issue 7, p22
Academic Journal
In this article, the author talks about seasonal investing. As April showers recede and May flowers spring to life, we are told to sell in May and go away. In a typical story of this genre, an author will point out the following: Imagine you invested $1 on December 31, 1949, and put that money to work in the S&P 500 Index. If you left your money alone, reinvested dividends, paid no taxes, and incurred no transactions costs, you would have $356.08 by March 31, 2003. What is curious here is that calendar months seem to fall into either the hot column or the cold column. Moreover, an extreme seasonal strategy like this is likely to look even less competitive once the tax consequences of the trades are factored into the equation. The bottom line is that sell in May and go away looks good over some long periods and even sounds catchy, but the real story is quite different. Our study of seasonal investing proves once again that time in the market is much more important than timing the market. The lesson? A disciplined strategy of investing in the stock market probably offers a better chance of helping you meet your long-term goals than any seasonal, market-timing strategy ever could.


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