Sell in May, and go away?

This analysis is only looking at the price of the S&amp;P 500, not the total return. An investor that sits out half of the year will miss out on about half of the dividends paid, which are always positive.<p>EDIT: Here is a graph highlighting how important including dividends is: <a href="https:&#x2F;&#x2F;i.imgur.com&#x2F;YZSq6K3.png" rel="nofollow">https:&#x2F;&#x2F;i.imgur.com&#x2F;YZSq6K3.png</a><p>Another consideration is taxes. The short-term gains produced by selling after 6 months are taxed at normal income rates (or slightly higher), as is the interest from the &quot;risk free&quot; interest-paying investment held the other 6 months. Long-term capital gains and dividends are taxed at favorable rates.

&gt; The question then is: What do you do with your cash when it’s not invested in the stock market? Assuming we put them in high caliber (“risk-free”) interest bearing fixed income instrument they would still give us a return on our investment while we’re out of the stock market. Based on data from various historical sources I’ll stick with an average annual geometric risk-free rate of 5%.<p>I must be misunderstanding this, otherwise WTF??? Tell me where I can get this risk-free 5% rate.

He fit some time periods that happen to avoid the 87 crash and most of the 2008 crash. It&#x27;s funny, when stats tell you this story, it feels more compelling than some instruction to just avoid the two largest market crashes since 1929, but in reality neither are telling you anything.<p>If you chop up financial data sets enough, you can always find some generally defined subsets that perform better than the whole set.

From the graph it looks to me like the entirety of the gain comes from skipping some of the 2008 financial crisis. <a href="http:&#x2F;&#x2F;www.agoraopus.com&#x2F;wp-content&#x2F;uploads&#x2F;2015&#x2F;04&#x2F;Sell_in_May_vs_Buy_and_Hold.png" rel="nofollow">http:&#x2F;&#x2F;www.agoraopus.com&#x2F;wp-content&#x2F;uploads&#x2F;2015&#x2F;04&#x2F;Sell_in_...</a>

Mark Twain allegedly quipped:<p><pre><code> OCTOBER: This is one of the peculiarly dangerous months to speculate in stocks in. The other are July, January, September, April, November, May, March, June, December, August, and February. </code></pre> Still relevant 100+ years later.

Shouldn&#x27;t he test his model on another dataset besides the one used to generate it? Maybe it&#x27;s overfitted. It would have been nicer to see the whole thing developed with only a decade or two of data, then shown to work for all the other decades too.

I moved a large portion of my IRA to cash towards the end of last year, there were just too many red flags and unknowns, and seemingly unexplainable reactions to the daily news cycle, and the market had performed just so well over the last several years, it seemed like a peak would have to be near.<p>Of course, what actually happened is I managed to miss a 15% bump in IJT, a 5% bump in VT, a 6% bump in IYY, and about flat in GLD. The two stocks I held directly however did go down about 10% since selling.<p>So yeah, the two most basic pieces of advice; you can&#x27;t time the market, and don&#x27;t hold individual stocks (without spending the time to actively manage your portfolio), both rang quite true for me at least the last 6 months. I just haven&#x27;t gotten back in, because I&#x27;m sure the day I decide to do that will prove to be the actual peak. :-&#x2F;

A few months back, I performed a two part analysis of this very subject.<p><a href="http:&#x2F;&#x2F;www.westonbeckett.com&#x2F;posts&#x2F;sell-in-may.html" rel="nofollow">http:&#x2F;&#x2F;www.westonbeckett.com&#x2F;posts&#x2F;sell-in-may.html</a><p><a href="http:&#x2F;&#x2F;www.westonbeckett.com&#x2F;posts&#x2F;sell-in-may-redux.html" rel="nofollow">http:&#x2F;&#x2F;www.westonbeckett.com&#x2F;posts&#x2F;sell-in-may-redux.html</a><p>In short, while returns for the May to October period may on average be less, they are positive and if anything, the returns for this period have been increasing. The one notable exception being the incredible selloff in 2008. Taxes are a more consistently important issue to consider.

I heard this many years ago. Asking a fund manager colleague, she mentioned it was mostly a fear of liquidity, not a question of HFTs, but should bad news strike, the markets she tended to invest in didn&#x27;t hold up well (or were not perceived to hold up well, perception causing reality) and price falls were irrationally large, due to this lack of liquidity.<p>Now, a fund manager that tends to hold onto a stock when its falling by definition sees the falls as irrational, but this was confirmed by her colleague that walked into the room. He added &quot;what&#x27;s really important is when retail investors start buying, then that&#x27;s really the time to sell [as after the stock gets popular with the public, who&#x27;s left to pump it up].&quot;

I don&#x27;t think this factors in the cost of selling and buying all your stocks twice a year.

By far, the worst month for me has always been March. Now that we&#x27;ve made it to April, I&#x27;m planning to sit tight till after the Santa Claus rally.

Seasonal stock market tendencies are real. I created a website (Seasonalysis.com) which quantifies these tendencies. Past performance is no guarantee of future returns but the information gleaned can be incredibly useful if combined with other indicators&#x2F;analysis.

Several problems: once you start looking at monthly data, you don&#x27;t have enough Mays to say with any statistical significance that May means anything<p>another problem is, transaction costs and taxes from selling and buying would probably eat up your gains

I sold in early March. To me it seems like more of a gamble to be in than out at this point.

I want to know what null hypothesis was used to generate those significance results.