As the summer season approaches and you’re getting ready to go away for vacation, you might start to hear the old “Sell in May and go away” investment adage come up.
As the rhyme suggests, investors are much more likely to be traveling or spending time on the beach than behind a computer screen during the summer months.
Unfortunately, like all cookie-cutter financial planning advice, following the “Sell in May” strategy could hurt your returns in the long term.
Here’s what you need to know about staying protected as vacation season approaches.
01 MAKE THE BEST OF THE “SUMMER SLUMP”
For generations, the warning of “Sell in May and go away” has convinced many investors to divest in May and practically disengage with the markets until the autumn months, typically waiting to reinvest until November.
Like all axioms, “Sell in May” has a kernel of truth to it. Historically, the Dow Jones Industrial Average posts lower returns from May through September, the “summery” months.
However, since around 2013, the performance of the “Best Six Months” seasonal strategy — investing from November and selling in May — hasn’t been as reliable as it has been in the past.
From 1950 to around 2013, the Dow Jones Industrial Average did, indeed, show lower returns from May through October compared to November through April, but since 2013, the data shows that trading seasonality is waning.
02 AVOID COOKIE CUTTER FINANCIAL STRATEGIES
“Sell in May” and other similar cookie-cutter financial strategies aren’t suited for every investor, and we don’t believe in “timing the markets.”
Investors who try to time the market with the “Sell in May” cliché can cause more harm than good.
For example, when investors pull out of the market in the summer months, they miss out on the opportunity to take advantage of strong summer runs.
Rather than attempting to time the markets, we feel our efforts are better spent helping custom-build all-weather portfolios for our clients. Regardless of your season of life, a properly constructed and actively managed portfolio is essential to long-term success.
03 MANAGING RISK AND VOLATILITY IN THE SUMMER
When it comes down to it, clever rhymes aren’t investment strategies, and divesting every May based on market speculation can hurt your long-term returns. That’s why working with a trusted advisor is so important.
At Head Investment Partners, our team of wealth management professionals carefully evaluate risk management and effective diversification to ensure that even during seasonal slowdowns, our clients’ investment portfolios are protected.
If you’d like to learn more about Head Investment Partners’ investment philosophy, schedule an appointment with us.
Reliability of Sources The articles and opinions expressed in this document were gathered from a variety of sources, but were reviewed by Head Investment Partners,LLC prior to its dissemination. All sources are believed to be reliable but do not constitute specific investment advice. In all cases, please contact your investment professional before making any investment choices.
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