Sell in May strategy

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Sell in May strategy

Postby atfish » Wed Jan 30, 2013 9:47 am

Has any BH ever employed the "Sell in May & go away strategy" and if so what was the results???
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Re: Sell in May strategy

Postby Mill » Wed Jan 30, 2013 9:49 am

I know it would have worked well last year. Plus it rhymes, so it must be a good idea. :D

STAY THE COURSE
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Re: Sell in May strategy

Postby Tom_T » Wed Jan 30, 2013 9:57 am

You can expect a flood of "sell in May" articles in mid-spring. Of course, if everyone used this strategy, that would result in a lot of selling in May, so you'd really have to sell in April. :)
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Re: Sell in May strategy

Postby NYBoglehead » Wed Jan 30, 2013 10:00 am

The problem with the "sell in May" strategy is it doesn't tell you when to get back in. You'd be missing out on some quarterly dividends by being out of the market and I don't know know about you but I'd be pretty PO'd if I sold in May and then the summer saw nice price appreciation.
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Re: Sell in May strategy

Postby Ranger » Wed Jan 30, 2013 10:03 am

"January effect" has been known to markets for long time. It has still not gone away.
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Re: Sell in May strategy

Postby Grt2bOutdoors » Wed Jan 30, 2013 10:03 am

atfish wrote:Has any BH ever employed the "Sell in May & go away strategy" and if so what was the results???


Reminds me of someone asking when is the best time to buy? The best answer is: everyday the market is open for trading. When is the best time to sell? When you need the money.
"Luck is not a strategy" Asking Portfolio Questions
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Re: Sell in May strategy

Postby SSSS » Wed Jan 30, 2013 10:05 am

A couple weeks ago I stumbled upon a "guaranteed to beat the market forever with no risk" strategy based on this idea:

November 1st, invest in a 3x leveraged mid-cap ETF, and hold until the end of April
May 1st, invest in a particular leveraged junk-bond ETF, and hold until the end of October

:oops:
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Re: Sell in May strategy

Postby larryswedroe » Wed Jan 30, 2013 11:13 am

If interested you can check out my blog at CBSNEWS as I have written on the strategy several times, and even before costs, especially taxes it has not worked
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Re: Sell in May strategy

Postby dkturner » Wed Jan 30, 2013 12:13 pm

NYBoglehead wrote:The problem with the "sell in May" strategy is it doesn't tell you when to get back in. You'd be missing out on some quarterly dividends by being out of the market and I don't know know about you but I'd be pretty PO'd if I sold in May and then the summer saw nice price appreciation.


I thought everyone knew that November is when you get back in - its on the back of the Sell in May card. 8-)
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Re: Sell in May strategy

Postby SSSS » Wed Jan 30, 2013 12:20 pm

dkturner wrote:
NYBoglehead wrote:The problem with the "sell in May" strategy is it doesn't tell you when to get back in. You'd be missing out on some quarterly dividends by being out of the market and I don't know know about you but I'd be pretty PO'd if I sold in May and then the summer saw nice price appreciation.


I thought everyone knew that November is when you get back in - its on the back of the Sell in May card. 8-)


Apparently the technical term is "Halloween Indicator".

http://en.wikipedia.org/wiki/Halloween_indicator

I'm a little skeptical about the neutrality and reliability of that article.
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Re: Sell in May strategy

Postby sscritic » Wed Jan 30, 2013 12:40 pm

You should actually sell in October when they announce the September CPI numbers to be used in the I bond inflation rate starting in November, and buy in April when they announce the March CPI numbers to be used in the I bond inflation rate starting in May.

Bonus: by buying and selling two weeks early, you get the famous front running bonus by acting before the crowds influence the market against you.
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Re: Sell in May strategy

Postby minesweep » Wed Jan 30, 2013 1:08 pm

larryswedroe wrote:If interested you can check out my blog at CBSNEWS as I have written on the strategy several times, and even before costs, especially taxes it has not worked
Larry

How the "sell in May" strategy fared in 2012

Does the sell-in-May strategy work?

Sell in May and Go Away? Not so fast, according to the numbers.

Mike
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Re: Sell in May strategy

Postby bengal22 » Wed Jan 30, 2013 1:10 pm

Settle on an Asset Allocation that fits and hold the course. Trying to predict the future is a fool's game(unless you're selling books).
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Re: Sell in May strategy

Postby atfish » Wed Jan 30, 2013 2:24 pm

larryswedroe wrote:If interested you can check out my blog at CBSNEWS as I have written on the strategy several times, and even before costs, especially taxes it has not worked
Larry


Thanks Larry for sharing your research material and especially keeping us focused on the BH way of investing.
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Re: Sell in May strategy

Postby Ranger » Wed Jan 30, 2013 2:56 pm

Seasonal pattern are more pronounced in commodities than stock markets. For eg. Natural gas tend to bottom in August, wheat in April etc..

Only seasonal pattern some what relevant in stock market is "January Effect". Even though out performance of stocks in January is diminished compared to very early years, out performance of small cap over large cap exists today.

http://www.cxoadvisory.com/3878/calenda ... -long-run/

http://online.wsj.com/article/SB1000142 ... 26368.html

One need to think, what is driving those effects. Sell in May theory is based in theory that traders go for holiday in summer and come back to their desk just before school season is not very credible. But retail investors (and some pro's too) sell for tax loss during end of the season, and get back in to market in beginning of the year like clock work is plausible. Also investors start to contribute to their retirement, profit matching, invest bonus money etc at the beginning of the year. Small cap with higher beta tend to perform better during January.

Question is can you monetize it?

If you are an investor, then probably you wont. Better to invest in vanguard index funds, then forget till you reach retirement.

But if you are a trader, then these are better odds than casino, so trader will play with 1 or 2% of your trading portfolio. This can be easily replicated with futures with no directional risk. Basically you are there to capture the spread. Transaction costs are negligible (less than 100 non vanguard ETF transaction at crappy VBS, Taxes are at 60/40 less than short term gain tax of etfs and stocks)
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Re: Sell in May strategy

Postby Random Musings » Wed Jan 30, 2013 3:22 pm

Where is Sudhi when you need him most?

RM
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Re: Sell in May strategy

Postby pingo » Wed Jan 30, 2013 4:03 pm

Tom_T wrote:You can expect a flood of "sell in May" articles in mid-spring. Of course, if everyone used this strategy, that would result in a lot of selling in May, so you'd really have to sell in April. :)


U.S. Stock Market from May 2012 to Mid-November 2012
Image

From the looks of the chart, those who sold in May had a decent chance of selling low before the the market went up buying high. Getting back in September would have been just in time to buy higher right before the market went down again.

One of the multitude of reasons that average investor returns are significantly lower than average fund returns.

Stay the course: buy, hold and rebalance!
Last edited by pingo on Fri Feb 01, 2013 12:01 am, edited 1 time in total.
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Re: Sell in May strategy

Postby Clive » Thu Jan 31, 2013 8:02 pm

NYBoglehead wrote:The problem with the "sell in May" strategy is it doesn't tell you when to get back in.

Sell in May, go away and don't return until Saint Ledger's day (horse race that is run on the second Saturday of September).

Considering its in the market for only three quarters of the time of buy and hold ??? (Proportionately might have worked on average).

All the Options traders perhaps selling out of the market so that they don't get caught with early exercises, before they go off to spend their bonus in some sunny location 8-)

In Europe its common to get at least 5 weeks vacation time, and are only allowed to work 35 hours a week - extra time might be tagged on to vacation time, such that three weeks or more of holidays might be taken during July and August summer months.
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Re: Sell in May strategy

Postby baw703916 » Thu Jan 31, 2013 8:19 pm

There was someone who used to post on the M* board and announced when it was "favorable season". Not sure he could be properly considered a Boglehead, though.

http://socialize.morningstar.com/NewSoc ... hread.aspx
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Re: Sell in May strategy

Postby Index Fan » Thu Jan 31, 2013 9:10 pm

Random Musings wrote:Where is Sudhi when you need him most?


Glad someone else remembered Sudhi!
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