Should You Sell Stocks in May? Data Proof

The stock market is about to see what has been the four worst months of the year for returns. From May through October, stocks have historically been down four of the six months and with some of the biggest crashes in history. Should you ‘Sell in May’ as the saying goes or keep investing in stocks? I’ll reveal the actual data behind the Sell in May phenomenon and how to invest. Join the Community for extra perks and access! Check out these member extras ✅ Instant Buy/Sell Notifications and Stock Ideas ✅ Stock Split and IPO Alerts ✅ Monthly Live Q&A ✅ ...MORE! https://mystockmarketbasics.com/BowTieMember 🤑 Get The Weekly Bow-Tie - my FREE weekly email newsletter sharing market updates, trends and the most important news! Market Updates for the Smart Investor! https://mystockmarketbasics.com/dailybowtie Despite many of the ‘investing rules’ you hear about being weak at best, there is actual data to support the idea that selling or at least hedging your stocks in the May through October period does produce a higher return. In fact, on more than 60 years of stock market data, that May through October period is five of the six worst months to invest and the only four months to average negative returns. My Investing Recommendations 📈 Check out the stock simulator and Get six FREE shares of stock worth up to $10,000 when you open a Webull investing account with any deposit! 🤑 https://mystockmarketbasics.com/webull 📊 Download this Portfolio Tracker and Investing Spreadsheet! [Community Discount Code] https://mystockmarketbasics.com/spreadsheetdiscount ✅ FREE Report! See the top five stocks in my portfolio, the five stocks I'm buying for the next 30 years! https://mystockmarketbasics.com/motleyfool ✅ Save $120 and get 50% off Premium Access to the largest investment analysis community in the world! Lowest price online for Seeking Alpha premium access! https://mystockmarketbasics.com/SeekingAlphaDiscount I’m not suggesting you dump all your stocks for the next six months. I’ll highlight how I’m investing but looking at the extreme case here helps to show the proof in this phenomenon. The Sell in May strategy says, you invest in the stock market, just the broad S&P 500 index from November 1st through April 30th of each year. That’s six months of the year you’re fully invested. For the other six months starting in May, you just go to cash or a guaranteed cash-like investment like Treasuries. We can see the results of that strategy in a comparison of stock returns over the 60 year period; the returns on the S&P 500 from May through October, those from November through April and a simple buy-and-hold strategy throughout. Investing $10,000 in a buy-and-hold strategy from 1950 would produce a portfolio of $644,751 over the 62 years. That’s an annualized return of 8.1% for more than six decades. Not bad and much better than investing only during the May through October periods which would actually lose money. If you had invested only during the May through October months during those 62 years, you’d have just $3,286 left in your portfolio. If however you used the ‘Sell in May’ strategy and held stocks only in the November through April months, you’d finish with more than $1.8 million in stocks. It’s an annualized return of 9.3% and while that’s just above the annual return on a buy-and-hold portfolio…it adds up! The number of years your portfolio was up or lost money would be dramatically better as well with the ‘Sell in May’ strategy. Over the 62 year period, stocks were up in 45 years and down 18 when considering the entire year period. Counting just the months from May through October, stocks were down 30 and up only 33 of the years, almost a 50/50 bet. During those November through April months though, stocks were up 53 of the 62 years, more than 85% of the time. Stocks prices have held up in the face of declining profits and the bank crisis but may not do as well when the economic effects of the crisis become more apparent. While I don’t suggest investors go completely to cash, holding at least 10% in cash or a Treasury-Ladder approach will give you purchasing power to take advantage of lower stock prices if they come along but still gives your portfolio the chance to rise with the market. I’ve covered most of my stock positions with covered calls through the end of the year, locking in much of the early gains we’ve seen so far. However you choose to invest, it’s best not to get complacent and expect stocks to keep going up with no corrections over the next several months. Joseph Hogue, CFA spent nearly a decade as an investment analyst for institutional firms and banks. He now helps people understand their financial lives through debt payoff strategies, investing and ways to save more money. He has appeared on Bloomberg and on sites like CNBC and Morningstar. He holds the Chartered Financial Analyst (CFA) designation and is a veteran of the Marine Corps. #stockmarket #stocks #stock