May 20, 2010

Go Away In May They Say, Good Strategy?

Go away in May they say, keep your cash for another day.  Thats a great old Wall Street saying which means sell in May and buy again in the fall. 
Studies have shown that strategy to be mostly false.
There is a negligible difference as compared to buying and holding and besides, you will incur commissions, costs and fees to sell and buy again in the fall.
Additionally, just like trading, sure its nice when you are right but hurts when you are wrong and unless you have a crystal ball, you end up like the dog chasing his tail and get nowhere.
A great example would have been 2009, it sure looked like after a nice runup from the lows in March after the bear market of 2008-9 that selling in May might be a great idea, well, it wasn't and alot of people sold and missed a massive run since and some never got back in.
While its tempting to try and beat the market (aka S&P 500) just dont.  Remember that over 90% of professional money managers can't so your chances are pretty slim.

No comments:

Post a Comment