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Stock market strategy - sell in May
15 May 2021 (384 views)

Many observers of the stock market saw a drop during May. They came with the slogan - Sell in May and go away.

This phenomena occurred in past years. The big fund managers sell their stocks in May and go on holiday. This caused the stock prices to fall.

When the fund manager return from holiday in August, they buy back the stocks that they sold earlier. This caused the stock prices to rise. 

Is it a good strategy to sell stocks in May and buy back in August?

Most retail investors get the timing wrong. They sell the stocks when the prices dropped. When the prices recovered, they were slow in buying back the stocks. They missed the rally.

A better approach is - stay invested. The prices will come back anyway. In the meantime, the retail investors can hold on to the stocks. 

The only reason to sell in May is for retail investors who bought the stocks on margin. If the prices fall, they may get a margin call and have to sell at a loss.

For retail investors who bought the stocks with long term savings, they do not face this risk.

Retail investors can take a short term trading position with a small portion of their funds. They have to be nimble and monitor the prices carefully. If they do not have the time to monitor the market, they should stay away from trading.

Tan Kin Lian


 


Stock market strategy - sell in May
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Many observers of the stock market saw a drop during May. They came with the slogan - Sell in May and go away.

This phenomena occurred in past years. The big fund managers sell their stocks in May and go on holiday. This caused the stock prices to fall.

When the fund manager return from holiday in August, they buy back the stocks that they sold earlier. This caused the stock prices to rise. 

Is it a good strategy to sell stocks in May and buy back in August?

Most retail investors get the timing wrong. They sell the stocks when the prices dropped. When the prices recovered, they were slow in buying back the stocks. They missed the rally.

A better approach is - stay invested. The prices will come back anyway. In the meantime, the retail investors can hold on to the stocks. 

The only reason to sell in May is for retail investors who bought the stocks on margin. If the prices fall, they may get a margin call and have to sell at a loss.

For retail investors who bought the stocks with long term savings, they do not face this risk.

Retail investors can take a short term trading position with a small portion of their funds. They have to be nimble and monitor the prices carefully. If they do not have the time to monitor the market, they should stay away from trading.

Tan Kin Lian