Sell ​​in May and go away: Historical data and modern investment strategies

Sell ​​in May and go away: Historical data and modern investment strategies

The old financial adage “Sell in May and go away” advises investors to sell stocks in May and not return until the fall. This advice is based on the observation that stock markets typically underperform during the summer months than at other times of the year. The saying originally comes from ancient England, where wealthy citizens spent the summer out of town and only returned for St. Leger's Day in September, a major horse race.

Historical data supports this seasonal pattern. An analysis by eToro shows that on average the price returns from May to October are lower than from November to April. This trend can be seen across various global stock indices and could be due to lower trading volumes and the lack of positive momentum in the summer months.

Despite Sell in May's historical basis, today's investors are skeptical of this simplistic investment strategy. Modern financial markets are more efficient and globally interconnected, making seasonal patterns less predictable. Long-term investment strategies that rely on holding and regular rebalancing could therefore be more successful.

For investors who build long-term wealth with stocks, dividend payouts and long-term investments are often more important than the timing of the market. Analysts expect growth in earnings per share and an increase in investments by companies. Despite possible differences in market assessments, long-term success with stocks is primarily determined by the selection of securities and the holding period.