Around this time every year, we start to hear a certain saying being muttered around the proverbial ASX investing water coolers. That phrase is 'sell in May and go away'.
You might have also heard the antiquated long form of this proverb, which goes something like 'sell in May and go away, come back on St. Leger's Day'. St. Leger's Day is a horse race that occurs in the United Kingdom at the end of September.
As we are now in May, let's discuss whether it might be a good time to sell out of your ASX shares and leave your cash in hibernation until Spring.
Obviously, this 'sell in May' proverb implies that global markets (the English origins of the phrase indicate the apparent investor aversion to Winter is not an Australian phenomenon) habitually experience some kind of annual mini-bear market that begins in May and subsides in September.
As such, the prudent thing to do is apparently to sell now while prices are high and buy back in Spring when the damage is done. But exactly how much stock should investors put in this old adage?
Is it time to 'sell in May and go away'?
Well, I would argue 'not much at all'.
As we've documented here at the Fool a few times now, there is no credible evidence to suggest the S&P/ASX 200 Index (ASX: XJO), or any other major market index, experiences a clockwork-like slump over the Australian winter months. Sure, some years see a downturn over this period. But others see rises, as is the case with any arbitrary timespan.
Just last year, the ASX 200 climbed by a massive 9% between 2 May and 30 September. Anyone who sold in May would have missed out on this stonking market rise, and would probably have felt rather silly by the end of September.
Rather than 'sell in May', I prefer the 'time in the market beats timing the market' proverb. Unlike the former, this one has solid evidence to back it up.
If you're still not convinced, consider these two quotes from legendary investor Warren Buffett and his longtime partner, Charlie Munger.
Buffett once said, "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".
Not exactly an endorsement of selling in May.
Munger once said, "The big money is not in the buying and the selling, but in the waiting". Again, it doesn't take a high IQ to gather that Munger wouldn't hold the 'sell in May' adage in high regard.
Let's see how the next few months go.
