It’s that time of year when investors pursue the “sell in May and go away” ideology. This refers to the strategy of stock investing from November to April, as it is believed these months will have better prospects than others. Those that follow this strategy will sell their equities around May and then repurchase equity investments around November.
Since 1970, the average return in May has been negative, however, in recent years equities have been performing better. Since 2000, equity return in May has seen more positive returns than negative and in the last five years, the market has been up every May. For example, in May of 2017, the FTSE All-Share index gained a return of 3.9 percent over the course of the month. Yet in May of 2000, the FTSE All-Share index saw a negative return of -0.4 percent. So is it smart to “sell in May and go away?”
Although the positive and negative returns in May are about equal, the returns are fairly low and market falls can be substantial. On average, the market trades in May are mostly flat for the first two weeks and then fall lower in the second half of the month. There are potential downfalls, however, to selling off your entire portfolio. Completely unloading your portfolio and repurchasing a new one a few months later can be costly and can create tax implications. There is almost no room for error, as there is a heavy reliance on many things going right. This greatly limits and narrows the investing path every year. In the event something goes wrong, you could create costly, long-lasting damages to your portfolio.
Due to the pitfalls of selling in May and then “going away”, using a different tactic when investing might be the better option for investors. Rather than putting all of the eggs in one basket so-to-speak, having a more diverse portfolio could ultimately result in a more beneficial long-term strategy. Having a mix of short and long-term assets will allow for a rebalance of measures and could help you better achieve your long-term investing goals.
It is important that you evaluate your assets and have a game plan for your long-term objectives when investing. Sell in May and go away or diversify your portfolio to account for fluctuating returns is a personal preference. Regardless of your investing strategy, be sure you make logical decisions and keep your long-term goals in mind.
David S. Chang is an entrepreneur, wealth manager, keynote speaker, consultant and Chairman/CEO of Chang Holding Company. David is also the editor of The Art of Thinking Smart, a blog and finance column in The Star-Advertiser’s weekly Midweek with a readership of over 400,000 people. He is also proud to serve as an Intelligence Officer in the Hawaii Army National Guard.
A longtime expert in finance, David uses his executive roles in various companies under Chang Holding Company in order to help people achieve their personal financial and business goals throughout all phases of their lives:
A wealth management firm (which has become ranked as one of the top in the nation and featured in Forbes)
WealthBridge Private Equity
A private equity and venture capital fund
Care for Life
A private-duty home and senior care company
Other companies under Chang Holding include GreenTech Pacific LLC and Pacific West Import/Export Hawaii.
David is the founder of The Art of Thinking SMART, The Art of SMART Money, and The Art of SMART Stocks. He created the Simple 4-Step System to Wealth and Financial Freedom. Supported by over a decade of research and driven by David’s desire to help others excel in all areas of their lives, this step-by-step online training program enables people to take control of their wealth immediately.
Everyone should have a financial plan, regardless of age, income or net worth.David S. Chang
David has always loved to learn and seek out opportunities to achieve the American Dream– so it comes as no surprise that he has taken numerous continuing education courses in finance, investments, and insurance. He also completed the Chartered Financial Consultant® (ChFC®) program at The American College.
In 2015 David was chosen as a member of InvestmentNews’ 2015 40 Under 40 list of top young advisers and associated professionals in the financial planning industry. He has been featured in Forbes as one of America’s Select Financial Leaders. In 2013 David was selected as 40 Under 40 Military by CivilianJobs.com, 2011 Pacific Edge Young Professional of the Year, 2010 Business Leader of the Year from the Pacific Business News Forty Under 40 and 2011 finalist for The Business Leadership American Savings Bank Business Leader of the Year.
In addition, WealthBridge Inc. was selected as a FIVE-STAR Wealth Manager for the State of Hawaii in 2014 through 2011, representing the top 2% of Wealth Managers statewide. In 2014 through 2012 WealthBridge Inc. was also selected by The National Association of Board Certified Advisory Practices (NABCAP) as a Premier Adviser.