Stock Market Strategy, Explained: Sell in May… and Go Away!

Sell in May and go away is an old Wall Street phrase that relates to a stock investing strategy. In fact, the complete version of the phrase has been, sell in May and go away, come back on St. Leger’s Day. As per this, an investor can look forward to improving their annual returns by selling stocks at the close of April and not reinvesting up to November.

The phrase has taken shape out of the observation that the period from May up to October has been a seasonally weak phase in the stock market. Historically, stocks have performed better, on average, from November through April. 

However, experts state that it is certainly not advisable for investors to get out of the stock market in May and come back by the year-end. Each year remains unique and different, and money left in the equity market has a better return.

Moreover, it has been proven historically that the opportunity cost of periodically exiting followed by re-entering the stock market could be quite high. So, this particular phrase shouldn’t be the factor to get influenced while shaping trading plans in a year.

This particular stock investment strategy may have worked in the past, but it is generally not a wise move to follow, especially for investors with a long-term investment time horizon. 

Also, the phrase does not take into consideration the performance of a few specific equities or current market or economic conditions, inflation or interest rate rise and fall. In addition, it does not zero in on how the political climate and government policy revisions related to the stock market could impact the overall sentiment. 

Remember, historical trends are not likely to correctly predict future performance, so do not be influenced by the herd mentality based purely on an adage. And always reach out to a financial professional whenever in doubt.