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It is probably the most well-known of all stock market sayings: “Sell in May and go away” – often combined with the addition “but remember to come back in September”. Sven Lehmann has investigated how useful the application of this stock market rule has been in the past years and decades.
The fund manager of the HQT Global Quality Dividend analysed which months would have given investors returns and which would have given them more risk, based on data from the S&P 500 Performance Index since 1872. He calculated whether the stock market wisdom was sensible – or whether there would have been better months to take a break from investing.
- “Basically, the stock market rule applies. If you look at the past 150 years, the months of September and May have not contributed to investment success, but only increased risk.”
- “If investors had not invested in the period from May to September, their performance would have been 6.3 per cent p.a.”
- “If you compare that to all the other twelve five-month breaks, the period from May to September still comes in second. “
- “From a yield perspective, it would only have been better to leave out the five months from February to June. Then the return would have been 6.5 per cent p.a.”
- “Investors who relied on the XL version of the stock market rule, which ends with ‘but remember to come back in September or better November’, would have fared worse. Their performance would have been only 4.6 per cent p.a. … although it would still have been the best period with a seven-month investment break.”
- “However, it would have been best not to sell at all. Over the entire period, the performance was 9.2 per cent.”