Over the past quarter, we have seen the markets down 10+ percent, and up that plus more. The past month has been really good for the markets, but we’re almost to the month of May, which brings a well known trading myth. Sell in May and Go Away is a saying that has been around for decades. It means that an investor will be better off to sell their entire portfolio of equities and buy back in at a lower price in November.
This myth is based on the fact that markets are usually volatile between May and October, and over the past 5 years, it has actually been true. We saw today, the markets take a mid afternoon downturn, which has brought this saying to the forefront of every financial news site’s headline.
Should you go by this “rule”?
My answer is; it depends. It depends on your investment style and horizon. If you are a mid twenties person saving for retirement, then definitely not. If you are more of a day trader that gambles on volatility, then it probably would not be a bad bet in my opinion. In 2016, we are seeing moderate growth and frankly, not so great earnings. The markets also reacted to the BOJ keeping negative interest rates. The markets have been great the past month, and are due for a nice, healthy pullback, so I believe you should expect rocky trading day from here to the end of 2016.
Now, do not go and liquidate your entire portfolio, I am still a bull on the US economy, but you can looks for opportunities to hedge the risk. There are many etfs that track investments such as precious metals and also exchange traded funds that follow the volatility index. If you don’t have all your money tied up in an IRA, I would suggest saving cash so you will be able to buy low, if the markets were to go haywire during these months like last year.
As always, due your DD when it comes to investing. There are tons of bad information out there, so be careful and have fun investing!