Should investors sell in May and go away?
“Sell in May and go away, don’t come back until St Leger’s Day”.
The phrase is an often quoted investment adage, referring to the St Leger’s Stakes, a horse race run in Doncaster and a four-day meet during the middle of September, with horse racing often being a favourite pastime of the financial world.
“The theory behind the idea probably stems from the time when trading was an in-person activity, which took place on the floor of the stock exchange,” explained Victoria Hasler, head of fund research at Hargreaves Lansdown.
“Investors were often wealthy individuals who would go away over the summer months to enjoy the leisure pursuits that the countryside offered.”
This meant that there wasn’t much trading activity over the summer months, and returns were lacklustre at best.
While this might have been true in the past, most trading now happens electronically, and it feels like investors are rarely away from their desks.
Looking at the FTSE All Share index, which includes around 600 of the largest companies traded on the London Stock Exchange, this has meant the saying no longer works.
In the last 30 years, the average return between the beginning of May to the end of September has been 1.05 per cent, with only six years showing negative returns.
This means that using the ‘Sell in May’ philosophy would have led £100 to turn into £353, compared to £402 if you had left it in the market the entire time.
“At the end of the day though, individual numbers don’t matter, because at the beginning of May you have no way of knowing if the next five-month period will be one of the positive ones or one of the negative ones, and what the magnitude of the return will be,” added Hasler.
Data from Fidelity looking over a longer time frame found that Sell in May has worked in just 14 of the 37 years and failed in 23 years.
Looking over 37 years, using Sell in May would have grown your £100 investment to £1,391.68 today. That compares to £2,014.45 if you had remained invested throughout the entire time.
| Year | FTSE All Share performance (30 April to 30 September) |
| 2004 | 3.01 per cent |
| 2005 | 16.21 per cent |
| 2006 | 0.68 per cent |
| 2007 | 0.24 per cent |
| 2008 | -18.55 per cent |
| 2009 | 23.42 per cent |
| 2010 | 1.63 per cent |
| 2011 | -14.50 per cent |
| 2012 | 2.28 per cent |
| 2013 | 3.24 per cent |
| 2014 | -0.90 per cent |
| 2015 | -9.92 per cent |
| 2016 | 11.58 per cent |
| 2017 | 3.97 per cent |
| 2018 | 1.77 per cent |
| 2019 | 1.84 per cent |
| 2020 | 1.94 per cent |
| 2021 | 3.52 per cent |
| 2022 | -8.59 per cent |
| 2023 | -1.87 per cent |
| Mean | 1.05 per cent |