USAT: History Says ... "Sell Stocks in May" ... Should You?

Old_Skeet

Those that have followed my post know that I adjust my equity allocation form time-to-time one of them being for the "Sell in May" Axiom. The article hilights the strategy and provides a perspective (both pro and con) concerning one following it this year. I have pretty much already right sized my portfolio for the historical summer slow period for stocks. I hope you enjoy the read.

http://www.usatoday.com/story/money/markets/2013/04/30/should-you-sell-in-may-and-go-away/2124237/

Good Investing,
Skeeter

STB65

My concession to this pattern is to direct my monthly 403b funds to cash from May until Sept. (well, maybe Aug.) then try to guess which areas will do well the next 6 months. Since I'm pretty much limited to Fidelity funds, this gets more complicated.
Additionally, isn't this supposed to be the worst year of the presidential cycle?

Old_Skeet

Hi STB65,

I thought this post would draw some comments form those like yourself who follow the axiom. I have noticed that since May is here and the markets are at new highs it seems as though the board has gotten quite. I am of the camp that at the present time this is one of the most difficult times to position new money. Simply stated, I don't wish to buy at or towards the top ... but, it seems that there are those that are doing just that. With super fast electronic trading systems (high frequency) that now prevail the investment winds can shift quickly based upon news and world events. In addition, I compute that stocks are selling by my thoughts at richly price levels based upon their trailing price earning ratio at better than sixteen. There seems to me there is too much hype about the forward earnings and revenue numbers that most know get reviesed, most frequently downward.

And, since things seemed now priced for perfection it want, from my thoughts, take much for us to have a little dip that might turn into a bigger pull back perhaps even on into a correction if the electronic trading boys feel valuation levels are just to frothy when bad news comes. With this, prices get driven downward so that they can in turn shake the weaker investors lose from their positions ... and, then, buy these shares up at a better price levels.

I dont know when this will ocurr ... but, I feel that it will not be too far off and eventhough it might not happen in May ... we still have June, July and August to come. With this, I am sticking with my plan. Should prices get driven downward to what I feel to be a good price level, at the time, I'll do some buying at these lower valuations. Understand, though, I am about 40% equity so if things continue upward I am enjoying the ride ... and, if they should turn downward I have a good bit of cash (15%) and short term fixed (15%) that I can do some buying with to ramp up my equity allocation.

Now that May is here ... there are many who have apparently decided to go silent rather than comment because they simply just might not know what to say, do, or position in a high valuation market. And, then there are the regulars that might be away traveling and on special projects like Catch.

I made this post and a few others over the weekend because I felt the number of posts and the hits the board was receiving were getting thin. Hopefully, things will pick back up.

I wish all ... "Good Investing" ... Until we meet again.

Skeeter

johnN

don't know what will happen but I think I would buy little more stocks/commodities. still 80/20 in 401k/tsp.

This guy is more 'right' than 'wrong' so we'll keep our fingers crossed for now
http://finance.yahoo.com/news/warren-buffett-stocks-lot-higher-104158450.html

scott

Reply to @Skeeter: I think the lack of links to news stories makes the board appear quiet, as someone pointed out the other day.

I'm still cleaning up a few things before I intend to not do anything for the Summer and rest of the year. I have a long-term view on what I own and don't want to try to time or micromanage and will just reinvest dividends.

Still will be around/chatting though.

I do think some people may be taking a break and enjoying nicer weather.

hank

A system ... is a system. IMHO - I think the really important thing is to develop a logical system you believe in and can adhere to over time. No doubt there's something to the summer "slow season" on which the annual SIM ritual is based. Won't work every year - but probably works most of the time over longer periods. I'd imagine those who practice it regularly have gotten pretty good at knowing when to pile back in. Others emphasize things like momentum, P-E ratios, rising dividends, bottom fishing, Presidential election cycles, last year's dogs of the Dow, 30-day moving averages, buying something you know a lot about (Peter Lynch), and charts resembling "double heads & shoulders". IMHO where you can really get into trouble is chasing performance (been there done that) and wandering about aimlessly with no plan. And yes - buying good funds and than shutting your eyes for 20-30 years is probably as good a system as the others - some would say better. Problem with the latter is: if we all did it here, we'd have to wile away the time talking about the weather!

PS: Here's one final one from MarketWatch - The Wall Street Cicada Index, which has proven highly reliable.http://articles.marketwatch.com/2013-05-06/finance/38479681_1_stock-market-returns-cicadas-bull-market