The stock market adage “Sell in May and Go Away” refers to the practice of selling out of the market in May and waiting until October to re-enter. In the past few years, there have been some market hiccups around this time. Seems that warmer weather has encouraged Europeans to protest in recent years. However, investors still wonder if it holds true in this economy.
Looking at it long term, if you had invested $100 for the past 25 years with compounded interest at 7.25%, you would accumulate $584.81. However, if you sold in May and re-entered the market in October during the last 25 years, you’d only have a loss opportunity of 55 basis points annually. After 25 years, you would have had $514.32—only 12.05% less than had you stayed invested the whole year.
Additionally, looking back to 1950, September has more traditionally been a difficult month for the stock markets. The market is not always down between May and October. It comes down to trying to time the market. Not only do you have to know when to sell, but you also have to know when to buy. Guessing absolutely right twice is next to impossible.
If you missed the 10 best days in the Dow Jones Industrial Average’s return in the last 109 years, you would wipe out two-thirds of the index’s cumulative returns. Likewise, if you missed the 10 worst days, you would triple the Dow’s return. These 20 days represent 0.0007% of the trading days.
At Henssler Financial we believe you should Live Ready, which includes understanding how difficult it is to time the market. The summer months are generally slow, and the markets can get a bit boring. However, if you were to sell out of the market for five months, you would miss July, which is traditionally a strong month for the market. If you have questions regarding your buy and sell strategy, the experts at Henssler Financial will be glad to help. You may call us at 770-429-9166 or email at experts@henssler.com.
This article is meant to provide valuable background information on particular investments, NOT a recommendation to buy. The investments referenced within this article may currently be traded by Henssler Financial. All material presented is compiled from sources believed to be reliable and current, but accuracy cannot be guaranteed. The contents are intended for general information purposes only. Information provided should not be the sole basis in making any decisions and is not intended to replace the advice of a qualified professional, such as a tax consultant, insurance adviser or attorney. Although this material is designed to provide accurate and authoritative information with respect to the subject matter, it may not apply in all situations. Readers are urged to consult with their adviser concerning specific situations and questions. This is not to be construed as an offer to buy or sell any financial instruments. It is not our intention to state, indicate or imply in any manner that current or past results are indicative of future profitability or expectations. As with all investments, there are associated inherent risks. Please obtain and review all financial material carefully before investing. Henssler is not licensed to offer or sell insurance products, and this overview is not to be construed as an offer to purchase any insurance products.
