Sell in May and go away?

Tom Stevenson, investment director for personal investing at Fidelity International, investigates to see if the old St Leger Day adage holds true.

Sell in May and go away?

The St Leger Day adage, which suggests that investors should: “Sell in May and go away, don’t come back ‘til St. Leger Day”, has long been touted as a good way to help improve your investment returns. However, analysis from Fidelity International debunks this stock market maxim and suggests that placing your bets on the adage could have left you significantly out of pocket.

With the famous St Leger Day race taking place on Saturday 16th September this year, Fidelity analysed the returns for the FTSE All Share between 1st May and 1stSeptember over the past three decades. It found that the index produced positive returns over these months in 18 of the past 30 years.

This means that you would have lost out on the majority of occasions had you backed out of the market in May, debunking the St Leger Day adage.

The St Leger Day stock market adage has been doing the rounds amongst investors for decades but perhaps it’s time to retire this old maxim as our analysis shows that it’s a bit of a lame horse. Had you followed the adage over the past 30 years, you would have been worse off 60% of the time.

While the summer has seen its fair share of geopolitical risks, including rising tension between North Korea and the US as well as stalling Brexit negotiations, the FTSE All share has still gone on to deliver a positive return between May and September. As such, anyone who followed this stock market adage this summer would have lost out.

Trying to predict the best time to be in and out of the market is a fool’s errand and getting it wrong can severely dent your long term investment returns. If there is one adage that investors should abide by it is ‘time in the market matters more than timing the market’.

 

Year Return Did the adage work?   Year Return Did the adage work?   Year Return Did the adage work?
1988 -0.28% Yes   1998 -11.72% Yes   2008 -6.12% Yes
1989 12.55% No   1999 -2.15% Yes   2009 17.85% No
1990 2.55% No   2000 7.72% No   2010 -4.61% Yes
1991 7.24% No   2001 -8.92% Yes   2011 -10.00% Yes
1992 -13.13% Yes   2002 -17.62% Yes   2012 1.18% No
1993 12.09% No   2003 10.55% No   2013 2.10% No
1994 4.30% No   2004 0.22% No   2014 1.92% No
1995 10.40% No   2005 12.37% No   2015 -7.39% Yes
1996 1.72% No   2006 -0.89% Yes   2016 9.72% No
1997 7.75% No   2007 -1.62% Yes   2017 4.41% No

Source: Fidelity International, September 2017. FTSE All Share Total Returns

 

Please remember, no news or research item is a recommendation or advice to buy. Every Investor is not responsible for accuracy and may not share the author’s views. If you are unsure of the suitability of any investment for your circumstances please contact an adviser. All investments can fall as well as rise in value so you could get back less than you invest and tax policies may change. 

 

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