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A Fool's Take On "Sell In May And Go Away"

Recs

3

September 29, 2012 – Comments (11)

I saw this article Tweeted out by Market Watch earlier:

http://www.marketwatch.com/story/sold-in-may-wish-that-could-go-away-2012-09-28?mod=MKTW_ALL&link=sfmw

Sell in May and go away just kills me. It is ass-backwards from what long-term investors need to be thinking. If stocks are getting killed May-October then maybe that implies prices are low? Ya think? Well I don't know about you but I agree with Warren Buffett when he said (and I'm paraphrasing here) but as net buyers of stocks we are happy to see prices go down in the short-term. It means we're getting better deals for the stocks we hold on to for long periods of time, hence we will earn better returns (assuming we are investing in awesome companies which we tend to do.

OK so I have a new Foolish spin on "Sell in May" and here it is:

Sell in May and go away is the wrong way to play; be prepared to buy stocks every single day!

Let's start pushing that one around and see if we can't completely unseat the old one with our new, Foolish one.

Best,

Jason

 

11 Comments – Post Your Own

#1) On September 29, 2012 at 12:01 PM, edwjm (99.86) wrote:

With me you have really hit a nerve.  This kind of post is my pet peave.  I oppose it on so many levels.  I wish there was such a thing as a negative rec.  I would give this post as many as I could.  I might even open several new accounts so that I could give it more neg recs.  It upset me when this idea was widely advanced in May, but it is even sillier now in September.  In fact, September is statistically likely to be unfriendlier to investors than May! 

This year, "Sell in May and go away is the wrong way to play; be prepared to buy stocks every single day!" would have been unusually bad advice.  Prices declined in May and into June.  Stocks sold could have been bought back cheeper.  New holding could have been bought for less.  "Buy high" is a loosing strategy if there ever was one!  "Always buy; never sell"isn't even possible unless you have a high income or enormous untapped reserves.  Many people, myself included, can't buy anything unless they sell something else first to raise the money.  Telling someone not to sell in a certain month of the year is just plain stupid.  In fact, telling people never to sell is stupid.   So what kind of companies are in your portfolio? Buggy whips? Carriages? Pony Express? Hula Hoops? Bustles?

Good luck with those, Jason!

A more useful post would be to tell me how to turn these itallic off.

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#2) On September 29, 2012 at 2:12 PM, HarryCarysGhost (99.77) wrote:

How bout

When the sellers start hatin' you best be investigating.

Edwin just click on the I icon so it's no longer highlighted.

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#3) On September 29, 2012 at 2:47 PM, TMFJMo (72.76) wrote:

That's a lot of negative recs there, but hey to each his own. And you certainly inferred a lot from one post. To be sure, I am a big believer in selling. In fact my stocks are up for sale every day so to speak and if the price is right then I'll sell 'em. You are also apparently approaching this from a different time frame than I am. If stocks are getting hammered, I want to buy more of them. I've no interest in buying high and selling low. I also have no interest in trying to time the market which is what the "Sell in May and go away" statement implies. 

I invest with a long-term horizon in mind. It's not perfect of course and it can and sometimes does change. But when I find a company that I'm interested in holding on to for years and the price gets whacked for what I see as an overreaction then I very well may buy more. And so far it's worked extremely well.

If you did infer from my Buffett quote of net buyers that I never sell, well then that's my bad I suppose for using it as I am big-time pro-selling when the price is right and I have other places to put the money.

"Always buy; never sell"isn't even possible unless you have a high income or enormous untapped reserves."

Did you seriously just say that? That is utterly absurd. You ever hear of saving money edwjm?

In fact, telling people never to sell is stupid. 

I agree. I never said that.

So what kind of companies are in your portfolio? Buggy whips? Carriages? Pony Express? Hula Hoops? Bustles?

Yeah, OK. I've apparently struck a nerve indeed.

The point of this post was simple: Don't blindly sell in May and go away. There can be many wonderful investment opportunities that arise from people blindly selling simply based on what month it is. If you are in a position where you need to sell to buy something else, then I advise you to start saving money on a regular basis so you don't have to deal with this problem.

 

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#4) On September 29, 2012 at 3:30 PM, awallejr (84.43) wrote:

One of my pet peeves is people saying "I could care less" instead of "I couldn't care less."  With that aside I think your new rhyme is a tad too long there Jason.  I tried to get "buy in May and stay I say."  But it didn't take hold.

There is actually another one that went "buy on Memorial day and sell by Labor day."  Basically your "summer rally."  That one worked perfectly this year.

Since I suck at timing and don't have the time to really trade I just buy when stocks I like are down.  So May actually becomes a good month to buy for me. 

In the end it is all about growing that income stream that is working nicely for me.

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#5) On September 29, 2012 at 11:15 PM, edwjm (99.86) wrote:

TMFJMo:

You have certainly changed your tune since your original post in comment #3.  Can I get you to agree that it is OK to sell in may if one is not doing it simply because it is May?

Now about your advice in comment #3:  I am 73 yrs old and I use my income from investment, mostly in stocks paying 3--4% in dividends, for my daily living expense.  I also have some cash and cash equivalents for emergencies.  So I am not in a position to save money to buy more stocks.

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#6) On October 01, 2012 at 5:40 AM, Valyooo (99.65) wrote:

Buy stocks for the long run..makes no sense to me.

Not only do I think buy and hold is a stupid game to play, but it does not even make sense on the fundamental level.  Why would one asset class perform better than all others forever?

Also, look at other countries across the world...stocks are not the best long term investment in non-us countries.

You can not sell in May if you want...me, i would rather book profits 

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#7) On October 01, 2012 at 5:42 AM, Valyooo (99.65) wrote:

It's also worth noting that Buffet made an extremely high % of his profits from arbitrage.  He also trades currency and made a lot of money off silver.  He also would prefer to buy private companies than stocks.  He is just famous for stocks.

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#8) On October 01, 2012 at 12:17 PM, edwjm (99.86) wrote:

Question for buy-and-hold fanatics:  How are your interurban stocks doing?

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#9) On October 01, 2012 at 2:45 PM, awallejr (84.43) wrote:

Hey you guys are free to do whatever you want with your money.   All I do is tell people what I am doing.  Since I don't charge for my advice here it doesn't matter if no one follows it.

But I don't understand how the term "fanatic" applies.  I tell people buy, hold and monitor.  Most individuals suck at trading.  And mainly because the game really is rigged. But when I started concentrating on mlps, bdcs and reits since '09 my income stream has grown quite nicely.  And I don't do drips.  I rather accumulate the dividends/distributions and redeploy where I wish.  I hate being locked on a set share price determined by the company.

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#10) On October 01, 2012 at 3:40 PM, TMFJMo (72.76) wrote:

I don't buy-and-hold; I buy-to-hold. Very big difference.

@edwjm: Can I get you to agree that it is OK to sell in may if one is not doing it simply because it is May?

Absolutely 100% agree with that! :) 

 

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#11) On October 01, 2012 at 6:04 PM, Valyooo (99.65) wrote:

@awallejr,

Much agreed on DRIPs...I will gladly pay the commission fee to have control over my buy price. Not only do I not want to buy when the stock is expensive, I would not want one stock becoming a major part of my portfolio. 

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