Sell in May and go away

[sidicks]

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.

Agreed - given the equity risk premium you'd expect to make money over the longer term. Whether you'd outperform other investments is a different matter!

[bad company]

The market does seem to have grown at a considerable pace. It can't all be attributed to Brexit as there has been similar increases worldwide.

I'm not selling as I think there MAY be more to come but I am now holding rather than re investing dividend income. If the market stays at this level I may well spend that money, otherwise I will re invest if the market goes down.

[swindler]

Don't forget there is a risk to holding cash in any particular currency. We're in the middle of a fairly unprecedented set of currency wars.

[Ozzie Osmond]

swindler said:

Don't forget there is a risk to holding cash in any particular currency. We're in the middle of a fairly unprecedented set of currency wars.

Very true. Since my spending is in £sterling there's a certain comfort in holding that currency rather than any other.

[Ozzie Osmond]

bad company said:

I'm not selling as I think there MAY be more to come but I am now holding rather than re investing dividend income. If the market stays at this level I may well spend that money, otherwise I will re invest if the market goes down.

Yes, it's all a bit Hotel California when there's nowhere else to put your money. All I've done is increase cash a bit and will hold tight for the ride - as usual! Since my strategy involves such a big proportion of equities this should suppress the risk of forced sales in a collapsed market.

[rustyuk]

I've cashed out today. Made a good return since cashing out before Brexit then going in the morning of the result.

Will sit and wait it out for the next couple of months...

[Ginge R]

sidicks said:

Agreed - given the equity risk premium you'd expect to make money over the longer term. Whether you'd outperform other investments is a different matter!

Agreed. More important than ever now, the strategy.

rustyuk said:

I've cashed out today. Made a good return since cashing out before Brexit then going in the morning of the result.

Will sit and wait it out for the next couple of months...

If you've already sold your investments and are waiting for the right moment, you could always consider feeding money back back in, instead of hovering. I chatted with three Fiver a Day clients yesterday, each looking to a add lump sums, a total of c.£45,000. Different circumstances but two were best advised to drip feed in the money.

There are many different types of bias; most relevant currently, I think, regency. We're in a place that we haven't been in for quite a while, we've seen good growth and understandably, we want to ring fence it. It should make investors review their capacity and inclination for risk and loss, and if there are items that your growth can buy, now's a good time to consider it. That doesn't mean we should forget the investing basics though.

[Ozzie Osmond]

I never know whether to buy in lumps and sell slowly or whether to buy slowly and sell in lumps. Does the risk profile ACTUALLY change or does the risk profile simply FEEL different?

What always bothers me is that the flip-side of avoiding big falls is missing out on big rises!

Equally well, with markets now sitting around their all time highs it would perhaps be reckless for a new investor to suddenly go "all in".

[bmwmike]

Do we not feel that equities still have some way to run with interest rates dropping etc ?

[jeff m2]

bmwmike said:

Do we not feel that equities still have some way to run with interest rates dropping etc ?

One would think so.

But so many people act on impulse.

We currently have the situation where the US lady can't make her mind because it's an election year. Possible influence.
IMO she could have raised rates (gently) a while back, unemployment had improved and consumer spending while not great was ok.
Now the rest of the developed countries have started easing, an int rate adjustment now would cause the Dollar to be even stronger which isn't desirable.
I think she missed the boat on an opportunity to get closer to normalisation.
I think the Fed is 50/50 on September. Market says not.

Diversification. 50% on your home team, spread the rest around.

The sell in May crowd got their divs in April and will not post here as they are currently on the beach in Amalfi.

[85Carrera]

Ozzie Osmond said:

What always bothers me is that the flip-side of avoiding big falls is missing out on big rises!

I tend to stay invested for this reason, but then I'm looking at a 15-20 year investment period. A lot of research has shown that it is time in the market (rather than trying to time the market) that gives the best returns. Also, if you miss out on a relatively small number of the best days, it has a disproportionate impact on returns.

https://www.fidelity.com.hk/static/pdf/investor/en...

I invest monthly, so am happy for markets to tank at the moment, so long as they recover by the time I want to access the money (and I will rebalance/take profits nearer the time I need to do that).

[twinturboz]

85Carrera said:

I tend to stay invested for this reason, but then I'm looking at a 15-20 year investment period. A lot of research has shown that it is time in the market (rather than trying to time the market) that gives the best returns. Also, if you miss out on a relatively small number of the best days, it has a disproportionate impact on returns.

As the great Jesse Livermore said:

"And right here let me say one thing: After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this.
It never was my thinking that made the big money for me. It always was my sitting. Got that? My sitting tight! It is no trick at all to be right on the market.
You always find lots of early bulls in bull markets and early bears in bear markets. I’ve known many men who were right at exactly the right time, and began buying or selling stocks when prices were at the very level which should show the greatest profit. And their experience invariably matched mine that is, they made no real money out of it.

Men who can both be right and sit tight are uncommon. I found it one of the hardest things to learn. But it is only after a stock operator has firmly grasped this that he can make big money. It is literally true that millions come easier to a trader after he knows how to trade than hundreds did in the days of his ignorance."

[twinturboz]

Some of the old advice doesn't seem to be valid anymore. The IFA's will know more than me but at one point wasn't a portfolio of equities and bonds considered a balanced one. Looking at the correlation between bonds and equites now I'd say that was a risky approach.