Tuesday, May 5, 2009

Sell in May Go Away - False

There has been this saying among both stock traders and investors alike that goes like this. "Sell in May, Go away." Basically these 5 words mean one thing. Sell your stocks in May, and don't look back until much later in the year. Traders for some reason think that overall its best to sell off everything right before summer, and come back in mid fall to buy it all back on the cheap. Although long term trends may point to this, I would say this is an extremely broad and very risky philosophy especially in todays markets which are already down over 40% from their peaks.

I thought I'd explore the last few years and see what would happen if one were to sell the Dow in May, and then buy it back in October.

Dow May 9th, 2008 - 12,745
Dow October 10th - 8,451 (Note that this was about when Lehman failed)
(Sell in May Go away is accurate)

Dow May 11th, 2007 - 13,336
Dow October 12th - 14,093
(Sell In May Go Away loses money)

Dow May 12, 2006 - 11,380
Dow October 13th - 11,960
(Sell In May Go Away loses money)

Dow May 13th, 2005 - 10,140
Dow October 13th - 10,287
(Sell In May Go Away loses money)

Dow May 14th, 2004 - 10,012
Dow October 15th - 9,933
(Sell in May Go away is accurate)

So, if you go back the last 5 years, It is pretty even. I would say that from recent data, don't make any rash decisions based on a simple trader saying.

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