The saying "sell in May and GO AWAY" is a common stock market saying based on the idea that markets historically perform better from November through April than from May through October. However, that's not a good strategy for a few reasons....
- You can miss strong rallies. Sometimes, some of the best months do happen during summer. Just missing a handful of big up days can significantly reduce long term returns.
- The pattern is inconsistent. While the seasonal trend has appeared in some historical periods, it doesn't work reliably every year.
- Taxes. Selling for no reason in investments within taxable accounts can trigger capital gains taxes, needlessly.
- Timing the market is difficult. Not only would you have to know when to sell, but when do you get back in?
The saying originated from a long time ago, when markets had lower trading volumes in summer. It was a time when wealthier investors and traders would retreat to the Hamptons, leaving the exchanges on their summer vacation. But today, markets are global and much more active year-round. So, stay focused on the long term and stay invested.