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Sound Advice: March 6, 2024

Sell Stocks in May and Buy Back in October?

The phrase "Sell in May and go away, come back in October" is a well-known adage in the stock market. Although it is well-known and may be supported by the market’s tendency to register two-thirds of its annual gains in the first and last quarters of the calendar year, that pattern doesn’t happen every year and may indeed be disrupted for several years at a time.

Following this advice blindly may not be the best strategy since the stock market is influenced by a wide range of factors, and historical patterns do not guarantee future performance.  Another key concern is the tax impact of selling and buying on this schedule, which may lead to higher tax costs, which could offset whatever gains may have been registered.

The idea behind the saying is that the stock market tends to underperform or be more volatile during the summer months, and investors might be better off selling their stocks in May and re-entering the market in October when conditions are presumed to be more favorable.  That’s an idea.  There may be others.  Whatever the reason, there is no such thing as a quick-and-dirty method of improving your investment results.

Although there may well be a historical basis for this pattern, it's crucial to remain aware that market conditions can vary from year to year, and the global economic landscape is constantly changing. Making investment decisions based solely on historical trends without considering current economic indicators, geopolitical events, and other relevant factors can be risky.

Investors are generally encouraged to adopt a more holistic and well-researched approach to investment decisions. Consider your financial goals, risk tolerance, and the overall economic environment when making decisions about buying or selling stocks. It's often a good idea to consult with a financial adviser who can provide personalized advice based on your specific situation.

The "Sell in May and go away" strategy is a historical pattern that has been useful over extended periods, but it is not a one-size-fits-all solution.  Better to base investment decisions on a comprehensive analysis of current market conditions and individual financial circumstances rather than what appears to be a straightforward, no-brain solution.

N. Russell Wayne

Sound Asset Management

Weston, CT

Any questions: please contact me at nrwayne@soundasset.com

203-895-8877

www.soundasset.blogspot.com

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