Beware market clichés

Trevor Green, Head of UK Equities.
Trevor is a fund manager responsible for retail and institutional funds.

There is a well-known stock market adage that advises investors to ‘Sell in May, Go Away and don’t come back until St Leger Day’. It originated in a more leisurely age when stockbrokers attended the many sporting activities that took place over the summer months. The social season began with Royal Ascot, included Wimbledon and the Henley Royal Regatta, and ended with the St. Leger horse race in September. During this period, many investors were absent from the market, and trading volumes and stock prices declined.

Today, the saying has become something of a cliché, trotted out each year by newspapers on both sides of the Atlantic. However, the usefulness of the sentiment for today’s investor is questionable. It ignores the cost of buying and selling shares, which can eat into profits. Additionally, while the overall market may lose value, carefully-selected, individual stocks may buck the trend and perform strongly. Conversely, if a stock you like falls significantly in the summer, simply because the overall market is doing badly, you could miss out on a bargain. 

Trying to time the market is fraught with difficulties, but a proven strategy over the long-term is to drip money regularly, say £100 monthly, into a fund that invests in a diverse range of stocks. That way you can take advantage of any price falls, so that your £100 buys more shares. Whether it’s May Day, St Leger Day or Michaelmas Eve… 

*Source: Bloomberg as at 19th May 2016

AR01699  06/2016

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