The truth about 'sell in May and go away'

It’s May. And one of the oldest “rules” on Wall Street is “sell in May and go away.”

Based on some rough historical observations, someone decided that it might be a great idea to stay out of the stock market between May and sometime in the fall.

The truth is that the market doesn’t tank during that period. Returns are just lacklustre, not negative.

FBN Securities J.C. O’Hara ran the numbers for the past 20 years and charted the returns.

“One is ‘selling’ not to avoid losses, but rather, ‘selling’ because there is not much to gain,” O’Hara wrote.

“We are not saying to ‘Sell in May’, as we are still constructive on the market, but rather our main message is to manage expectations over the next few months,” he continued. “Average years give managers little to work with over the summer months.”

So there you have it.

Also, remember, history is, at best, a guide, not gospel. We could have huge gains this year. Or we could crash. Who knows?

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