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Sell in May and Go Away: Two Market Myths to Avoid this Summer

by Jim Lineweaver, CFP®, AIF®

There’s an old saying you’ve probably heard that says “Sell in May and Go Away.” But is that good advice? What’s the best thing for you and your investments over the historically slower summer months?

The phrase “sell in May and go away” is thought to originate from an old English saying, and it turns out it did have some validity, at least from 1950 to around 2013. During that time, the Dow had an average return of only 0.3% during the May to October period, according to Forbes. But, since 2013 there’s good reason to believe that’s no longer the case. For example, the S&P 500 rose nearly 7% from the beginning of May 2017 through the end of October, according to YCharts. The blue-chip index was up 5% during May through October of 2016 as well. 

Another common myth is the October Effect, which is the perception that stocks tend to decline during the month of October. Most statistics go against the theory. Some investors may be nervous during October because the dates of some large historical market crashes occurred during this month. But fortunately, this seeming concentration of days is not statistically significant. From a historical perspective, October has marked the end of more bear markets than it has acted as the beginning. 

We try to help all of our clients keep these things in mind when making decisions, and don’t let these myths cloud their judgment. One of the most important things we can do is to take emotion out of your process, and to help you make decisions made on solid facts, trends, and your financial goals. 
 

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