Should investors sell in May and go away?
Ask Matt: Should investors sell in May and go away?(Photo: Thinkstock)
USA TODAY markets reporter Matt Krantz answers a different reader question every weekday. To submit a question, e-mail Matt at This email address is being protected from spambots. You need JavaScript enabled to view it..
Q: Should investors sell in May and go away?
A : Investors sitting on big stock gains this year are probably already eagerly waiting for May 1 to arrive. And for good reason.
"Sell in May and go away" is an old saw on Wall Street, which states that investors are best off getting out of the market May 1 and staying out until the end of October. This old adage, for whatever reason, is widely followed in part because it does seem to work, including in recent years.
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Since 1950, the bulk of the market's gains have occurred between November and April. In fact, the average annual gain by the Dow Jones industrial average between Nov. 1 and April 30 is 7.5%, versus the paltry 0.3% gain between May 1 and Oct. 31, says Stock Trader's Almanac.
Even better, investors who got out of the market between May and October have avoided some of the uglier periods for stocks. The Dow fell by 10% or more 11 times between May and October since 1950, but only three times between November and April.
But for investors with the fortitude to hang on, sitting pat is perhaps even better than going away in May. Investors who bought stock on May 1 and held on, reinvesting dividends, had a return of 11.1% a year on average, topping the gain of the investors who sold in May and went away.
References
- ^ https://portfoliotracker.usatoday.com/?uref=mkrantz/ (portfoliotracker.usatoday.com)