This April and May, the TSX and DOW have hit their 2013 highs. For those of us who are long-term investors it’s really a moot point – it’s simply part of the business cycle. But for many investors the investing question comes to mind, Sell in May and Go Away?
A phenomenal article by Louis Basenese, chief investment strategist at Wall Street Daily, tells you exactly why you should not implement the strategy. In, Sell in May? Not According to These Three Charts, Louis clearly shows why you should ignore the short-term swings and remain a long term buy-and-hold investor.
For the opposite viewpoint, be sure to check out this BNN video with Jeffrey Hirsch, whose father originally coined the infamous Sell in May and go Away investment adage. There is an article below the video, in which Hirsch’s firm begins to prepare by selling off their winners, and placing stop losses on other positions, as early as March.
While Sell in May and Go Away may sound like a sound investment strategy, it doesn’t always ring true every year. Sell in May creates a problem for investors who sell positions, and then go on to watch markets soar to new highs. Investors can miss out on both the dividend income and future potential capital appreciation.
One way around this is to use stop-losses to take profits on stocks that have hit new highs. But again many investors have been stopped-out on positions, only to watch their positions continue to rise. Generally winners continue to win for an extended period of time. Another strategy is to hold cash after the Christmas Rally which begins in late November to December, then deploy cash in the summer and fall if and when stocks decline. Over the last few years, August to September have been great months to purchase stocks after sudden but short market declines.
Reader’s what’s your take? Concerned about markets hitting five year highs? Selling in May or adding stop losses to your positions?
Weekly Reading Links
It’s that time of the week again. Check out these other great reads from around the web!
Dividend Investing – Telecom, Real Estate and Energy @ Dividend Ninja
Kimberly-Clark Dividend Stock Analysis @ Dividend Growth Stock Investing
Colgate-Palmolive Dividend Stock Analysis @ Dividend Monk
2013 Dividend Achievers List Updates @ Dividend Growth Investor
Is Microsoft a Utility? @ The Passive Income Earner
Sell In May and Go Away? @ The Dividend Guy
How to Create a Disciplined Investment Plan @ A Wealth of Common Sense
Have a nice weekend everyone! 🙂