Why equity investors shouldn’t “sell in May and go away”

By: Tim Bennett
“Sell in May and go away” is one of investing’s oldest sayings. Tim Bennett explains why it should be consigned to history.

Why equity investors shouldn’t “sell in May and go away”

An old investing cliché suggests that investors should dump shares in May, just before the summer holidays and then buy them back again on St Leger’s day in the Autumn. Here I explain why this is not a good idea.

The theory

The concept behind the cliché is that over the summer, the US stock market in particular suffers a lull as big investors wind up positions and head off to the Hamptons (or equivalent). They don’t return to the market until the famous St Leger race in September and then their buying activity sees the stock market push on through to Christmas. The logic therefore is that smaller investors should mimic this pattern. And since the US tends to drive stock market patterns elsewhere, the implication is that this is a good strategy in other markets too. But is it? Here are several reasons, courtesy of data provided by Charlie Bilello at Pension Partners, to suggest otherwise.

A small gain is still a gain

If we look back over the long period from 1928 to 2018, the data reveals that although the stock market has performed better, on average, between November and April, the return is still positive during the period when the cliché suggests you should be out of the market. So an investor who does “sell in May” misses out overall.

The odds barely change

The next issue is that although the chances of making a positive return during this period were higher during the November-April period than during May to October, the difference is not as great as supporters of the “sell in May” theory would have you believe on a total return basis (taking reinvested income and capital gains into account).

The compounding effect

Worse, although these differences appear small, over a long performance period they accumulate into a huge total difference, based on a starting investment of $10,000.

Why this happens…

The reality is that although some months do seem to generate better subsequent returns over the next 1, or 5, or 10 years, these differences are pretty small. This means that although picking “better” months over “worse” ones will make a difference, actually identifying them is tough and the reward doesn’t really justify the effort as this table shows;


Whilst it is tempting to think there are systems around that allow you to beat the market, the reality is this is much harder to do than it seems. These days it is even harder as much of the stock market trading that takes place is driven by computer programs. Our advice therefore is to leave clichés such as “sell in May and go away” alone. They will only tempt you to become a market timer and could cost you in both fees and lost returns.