«Sell in May and Go Away» is a seasonal market timing strategy based upon the premise that stocks have historically performed better in the Winter months than in the Summer months. The idea of selling in the month of May is rooted in The Halloween Indicator, which points to historically higher returns in the six-month period from November 1 through April 30.
Mutual fund investors buys and sells based upon their own unique investment objectives like time horizon, financial goals and risk/reward. Their investment decisions is never made on the basis of patterns.
Their sell strategy is not a type of guessing game that rely more on luck than on skill. They sell in may (if they need to) like any other months, so it’s no different in may than any other months. Historically, the stock market is bad from May 1 to October 31, so some investors are buying in that time frame, because the stock prices are lower.
You shouldn`t listen to investors saying «Sell in May and go away». The popular adage «Sell in May and go away» proved to be wrong this year. It was wrong for Indian stocks as the benchmark Sensex gained a whopping 1,800 point and that is the best monthly gain in recent times.
Indian stocks scaled new record highs in May this year, with the benchmark index Sensex rising above 25,000. It rise on new hopes of economic revival as Narendra Modi became the new Prime Minister.
The 30-scrip Sensex gained 1,799.54 points to end at 24,217.34 in May, breaking the May jinx. Is it always like this in India in May? No, it gained 24,53 points in May last year. In May 2012, the stock market dropped 6%. In 2011 and 2010, the Indian stock market fell about 2,5%.
The BSE Sensex touched a record high on 25,375.63 on May 16 this year. This is the day the results for the general election gave Bharatiya janata Party (BJP) a clear mandate. BJP coming into power with full majority has enthused markets.
BJP and Modi is not the only reason why the Indian markets are in an euphoria. Overseas investors have pumped in about Rs 34,000 core in the stock market in India in May. But how is it in the U.S market right now?
It’s the same. New record highs in both S&P 500 and the DOW. The S&P 500 ended Friday up 3,5 points, to 1923,57. The DOW ended up 19 points, at 16717.17, and this is all time high. S&P 500 ended the month in May up +2,10%, while the DOW was up 0.82% in May.
It was a great month for investors in May, and it seems to be little fear in the market, as the VIX (fear index) is at its lows of the year. I think we can blame the FED for the bull market we see right now. QE is the reason for all this.
Some people do not belive in the Summer months and think it is bad for long-term stock investments. People like this usually sells in May and then wait until the Autumn before they buy stocks again.
This is wrong. The summer offers just as many trading opportunities as the rest of the year. Some professional traders are more active during the summer, because the can take advantage of specific markets that are more actively traded during the summer.
Take a look at the commodities and more specific on summer products like corn and wheat. Products like this is more active during the summer because the agricultural industry is very active, like crops and growing and so on.
To sum up; Stick to your own investment objectives and don`t listen to the media noise out there. The decision to buy or sell is a matter of understanding your own purposes for investing.
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