Robert Cable, Director, Wealth Management at ScotiaMcLeod, and author of the excellent Investing on Autopilot (an excellent book, by the way), is quoted on the subject of "Sell in May and Go Away."
Nobody knows exactly why the stock market has an uncanny tendency to deliver lousy returns from May through October, but post stellar gains from November through April.
The difference is staggering. According to the Stock Trader’s Almanac, $10,000 (U.S.) invested in the Dow Jones industrial average from Nov. 1 to April 30 every year from 1950 to 2008 would have grown to $474,305, assuming the money was switched to fixed-income investments from May 1 to Oct. 31.
But if the $10,000 was invested in stocks from May 1 to Oct. 31 and parked in fixed-income for the other six months, it would have shrunk to $8,012.
Robert Cable, director of wealth management with ScotiaMcLeod, is so convinced of the “sell in May” strategy that he switches a portion of his clients’ money – usually 10 to 33 per cent – to capitalize on the trend. He does the same with his own portfolio.
“I guess some people would say it’s dumb luck, but I’ve got data going back to 1950,” he says.
From yesterday's Globe and Mail
Source: Why you should sell in May and Go Away, John Heinzl, May 10, 2010
Additional resources:
Should you sell in May and go away?, Reuters, May 5, 2010
