Sell in May and go away
Discussion
"Sell in May and go away" is a well-known trading adage that warns investors to sell their stock holdings in May to avoid a seasonal decline in equity markets. The sell-in-May-and-go-away strategy is where an investor sells his stock holdings in May and gets back into the equity market in November, thereby avoiding the typically volatile May-October period. This strategy is based on the historical underperformance of stocks in the six-month period commencing in May and ending in October, compared to the six-month period from November to April. [Courtesy of Investopedia.]
Well, 2016 has debunked that good and proper. So where next?
The huge surge (+15%) in markets since May this year has upset the usual program where I ignore investment matters until the long dark evenings of Autumn. Instead I've found myself compelled to take some profits, unsure of what's going to happen when,
Well, 2016 has debunked that good and proper. So where next?
The huge surge (+15%) in markets since May this year has upset the usual program where I ignore investment matters until the long dark evenings of Autumn. Instead I've found myself compelled to take some profits, unsure of what's going to happen when,
- Everybody comes back from the summer beaches to face reality,
- The impending US elections bring uncertainty towards November, and
- The Brexit slowdown shows clearly in UK figures towards the end of calendar 2016.
For what its worth, I'm taking profits now too. In my view the rise has been to quick in order to hold most of it. I'm selling a number of UK Funds, Schroder Tokyo, Jupiter Asian Income, Aberdeen Latin American. Im either selling 100% or just taking my profits and still hold a position. I still have 5 figures tied up in the UK Henderson Property fund so that stings a bit. If that ever opens again I can see a massive drop so I need all the winnings I can take right now.
Im also selling all of my CF Woodford fund which is up 30% from the original launch price so Im happy with that one!
Im scared of lower interest rates having no effect, more helicopter money, the US elections and the Brexit negotiations .
Im also selling all of my CF Woodford fund which is up 30% from the original launch price so Im happy with that one!
Im scared of lower interest rates having no effect, more helicopter money, the US elections and the Brexit negotiations .
Edited by oldaudi on Wednesday 17th August 16:18
Edited by oldaudi on Wednesday 17th August 16:25
oldaudi said:
For what its worth, I'm taking profits now too. In my view the rise has been to quick in order to hold most of it. I'm selling a number of UK Funds, Schroder Tokyo, Jupiter Asian Income, Aberdeen Latin American. Im either selling 100% or just taking my profits and still hold a position. I still have 5 figures tied up in the UK Henderson Property fund so that stings a bit. If that ever opens again I can see a massive drop so I need all the winnings I can take right now.
Im also selling all of my CF Woodford fund which is up 30% from the original launch price so Im happy with that one!
Im scared of lower interest rates having no effect, more helicopter money, the US elections and the Brexit negotiations .
Also sold CF Woodford fund, as well as taking profits on Vanguard fund, can't help but feel a drop is coming!Im also selling all of my CF Woodford fund which is up 30% from the original launch price so Im happy with that one!
Im scared of lower interest rates having no effect, more helicopter money, the US elections and the Brexit negotiations .
Edited by oldaudi on Wednesday 17th August 16:18
Edited by oldaudi on Wednesday 17th August 16:25
Take time out to think how you’d feel if the markets corrected (for corrected, read ‘dropped’, we love metaphors in financial services!) and ask yourself. How would you feel if you lost, say, 50% of the growth that your fund had (possibly, unexpectedly) made. Have you considered the maths? Your fund needs to then double in size, or grow by 100%, to simply get back to where you were before the loss. And even that doesn't allow for time you may have lost in clawing back portfolio value.
If you are happy with how things are, and most people will be content to continue with their prescribed attitude to risk and capacity for loss, fine - don't forget the power of rebalancing. And before you decide to do anything, have a sense check.
1. It's far easier to lose money than it is to make it.
2. Most domestic break ups and rows caused by the lack of money.
3. Paper profits have no more value than the scrap of paper that then written on.
4. Will you be a happier person if you're not too worried investor? Payoff expensive debt!!
Risk capacity is defined as how much risk you can afford to take – but what does that actually mean? First, the concept “afford to take” means you must have a specific goal in mind to provide context, it's not possible to measure “afford to take” unless you have this. A recent paper by our own regulator provided clarity: "By ‘capacity for loss’ we refer to a customer's ability to absorb falls in the value of their investment. If any loss of capital would have a materially detrimental effect on their standard of living, this should be taken into account in assessing the risk that they are able to take."
If you need £30,000 a year of income, and have guaranteed income from, say, a defined benefit pension that produces £30,000, by definition you have unlimited risk capacity with other investments as any behaviour in the portfolio is irrelevant to achieving your objectives. If you want £30,000 a year (and don't have guaranteed income), and if £20,000 a year is essential, does your capacity for loss just reflect the balance of the different requirements? As ever, context is vital, if you can't handle big losses, why on earth were you investing with exposure to that sort of fall? Just make sure you're not prey to knee jerk reactions.
Look on financial success as a consequence that'll happen if you get those basics right. Are they still right? Don't trust to luck by being too smart about it. Even if you get it right this time, you think you can do it the next, and the next. You won't. Remember the danger of confirmation bias. Get the basics right. It's better to be 75% right all the time with the basics rather than 100% right of the time, occasionally.
If your money has done well for you, consider taking the opportunity to build that extension early (one of my clients has given his daughter a further £10k for a better wedding and honeymoon), and remember CGT. But for most people still saving and who have a long investment window, remember.. if you're worried about loss, are you investing in funds which are simply too spicy? How quickly we forget the lessons we have learned so painfully these past 8 or 9 years.
If you are happy with how things are, and most people will be content to continue with their prescribed attitude to risk and capacity for loss, fine - don't forget the power of rebalancing. And before you decide to do anything, have a sense check.
1. It's far easier to lose money than it is to make it.
2. Most domestic break ups and rows caused by the lack of money.
3. Paper profits have no more value than the scrap of paper that then written on.
4. Will you be a happier person if you're not too worried investor? Payoff expensive debt!!
Risk capacity is defined as how much risk you can afford to take – but what does that actually mean? First, the concept “afford to take” means you must have a specific goal in mind to provide context, it's not possible to measure “afford to take” unless you have this. A recent paper by our own regulator provided clarity: "By ‘capacity for loss’ we refer to a customer's ability to absorb falls in the value of their investment. If any loss of capital would have a materially detrimental effect on their standard of living, this should be taken into account in assessing the risk that they are able to take."
If you need £30,000 a year of income, and have guaranteed income from, say, a defined benefit pension that produces £30,000, by definition you have unlimited risk capacity with other investments as any behaviour in the portfolio is irrelevant to achieving your objectives. If you want £30,000 a year (and don't have guaranteed income), and if £20,000 a year is essential, does your capacity for loss just reflect the balance of the different requirements? As ever, context is vital, if you can't handle big losses, why on earth were you investing with exposure to that sort of fall? Just make sure you're not prey to knee jerk reactions.
Look on financial success as a consequence that'll happen if you get those basics right. Are they still right? Don't trust to luck by being too smart about it. Even if you get it right this time, you think you can do it the next, and the next. You won't. Remember the danger of confirmation bias. Get the basics right. It's better to be 75% right all the time with the basics rather than 100% right of the time, occasionally.
If your money has done well for you, consider taking the opportunity to build that extension early (one of my clients has given his daughter a further £10k for a better wedding and honeymoon), and remember CGT. But for most people still saving and who have a long investment window, remember.. if you're worried about loss, are you investing in funds which are simply too spicy? How quickly we forget the lessons we have learned so painfully these past 8 or 9 years.
Ginge R said:
Take time out to think how you’d feel if the markets corrected (for corrected, read ‘dropped’, we love metaphors in financial services!) and ask yourself. How would you feel if you lost, say, 50% of the growth that your fund had (possibly, unexpectedly) made. Have you considered the maths? Your fund needs to then double in size, or grow by 100%, to simply get back to where you were before the loss. And even that doesn't allow for time you may have lost in clawing back portfolio value.
Eh? Aren't you talking about the fund losing 50% of its value, not its growth?!
Ta. Needed that. Been battling platforms and Phoenix Life. 
Ginge R said:
It's far easier to lose money than it is to make it.
That's got me thinking; with a moderately sensible approach to equity investments is that statement "true" or "false"?On balance I think it must be "false", which seems surprising. But I suppose that's the whole point - investing isn't gambling.
What never ceases to amaze me is the staggeringly high failure rate of new business start-ups, especially restaurants.
Ozzie Osmond said:
That's got me thinking; with a moderately sensible approach to equity investments is that statement "true" or "false"?
On balance I think it must be "false", which seems surprising. But I suppose that's the whole point - investing isn't gambling.
What never ceases to amaze me is the staggeringly high failure rate of new business start-ups, especially restaurants.
You could be right, I'm as susceptible to glib sound bites as anyone. I guess, I was thinking more accurately, that to be successful, you have to put the effort in. Fortune favours the brave - but only occasionally. Bugger, there I go again. On balance I think it must be "false", which seems surprising. But I suppose that's the whole point - investing isn't gambling.
What never ceases to amaze me is the staggeringly high failure rate of new business start-ups, especially restaurants.
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