That old stock market adage ‘sell in May and go away’ tends to crop up around this time of year, for obvious reasons. It’s a crusty old proverb that no one seems to really know where it came from, or how it applies to modern investing. The idea is that May somehow represents an annual high point for share markets, including the ASX. So we should all sell all our ASX shares just before winter, and perhaps buy back in…. at some point.
You can already see the logic here is a little flimsy. But we Fools like to put our money where our mouths are. Last year, this writer looked at the historical performances for the S&P/ASX 200 Index (ASX: XJO) over a few past Mays. The result? There’s not much to write home about. But you can check out the very sophisticated visual representation here.
So is there any good reason, at all, to sell in May and go away? Given today is this May’s second-last trading day, it’s a good time to ask.
Sell in May and go away?
Well, to answer that succinctly, and perhaps definitively, here’s a couple of quotes from the great investor Warren Buffett from our friends over at Fool.com:
I never attempt to make money on the stock market. I buy on the assumption that they could close the market the next day and not reopen it for five years.
Buy a stock the way you would buy a house. Understand and like it such that you’d be content to own it in the absence of any market.
If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.
Does that sound like Mr Buffett would endorse a ‘buy in May and go away’ investing strategy?
Indeed, the ASX 200 has performed a coup de grâs of sorts on this idea in 2021. Any ASX 200 investor who sold their shares on 30 April would have missed out on, not one, but two new record highs that the ASX 200 has hit over the month. The first came on 11 May, and the second, just today. Indeed, the ASX 200 (at the time of writing) has managed to add a healthy 2.2% over the month so far. Unless Monday brings us one of the worst one-day selloffs ever, it’s likely that May will be a month in the green for ASX 200 shares. Case closed? Well, at least until May 2022.