The investing saying that we should “Sell in May and go away” is a common one. The idea is that stock markets drift a bit during the summer when people have better things to do. And they get serious again once the days start getting shorter.
There is evidence that the summer months are weaker than the rest of the year, on average. And in 2020, it might have been better to switch off from the stock market for other reasons. But what about investors who sold out at the beginning of May this year? What might they have missed?
There are some nice gains at Lloyds Banking Group, for one thing. The Lloyds share price has been climbing all year, up more than 35%. And the momentum carried on through May. Lloyds shares are still down since the pandemic, and it’s been a tough five years. But would I sell in May, just when my shares are finally starting to pick up? What the rest of the summer still holds is anybody’s guess. But with Lloyds dividends coming back, I’d still be a buyer now and not a seller.
Not all shares have kept on going up, mind. Argo Blockchain has been big in the news in 2021, as it chased the Bitcoin price upwards. But it’s been a poor May for Argo shareholders, following several previous poor months, as the shares have declined. Selling in February might have been better, with hindsight. So sell in May? If someone gave me some Argo Blockchain shares, yes, I’d sell them. In May, or in any month.
Dump before the summer?
The UK’s airlines have picked up in 2021, with International Consolidated Airlines ahead more than 20%. And easyJet is not far behind. It’s all been down to the opening up after lockdowns, as people turn their thoughts to sun and sand. The airlines have had a pretty mixed month in May, mind, so what’s next for them? I’ll make no short-term guesses. But I also wouldn’t sell just ahead of the summer holiday season.
Related to the airline business, the Rolls-Royce share price hasn’t gone anywhere in May. In fact, it’s close to flat overall since the start of 2021. But if I owned Rolls shares, would I have wanted to sell in May? Ahead of the summer season when we might see things perk up as planes get flying some more? Not a chance.
An alternative to “Sell in May“
These share price movements I’m talking about are all very short term. They say absolutely nothing about where the shares will go in the longer term. So no, I wouldn’t base any investment decisions on short-term moves, and this look at them is just for a bit of fun.
But I do have a variation on the “Sell in May and go away” theme. Whenever I invest, I only buy shares when I feel I’d be happy to “Buy now and go away for five years.” That’s my minimum investing horizon. And to follow Warren Buffett’s advice, if I wouldn’t hold a share for five years, I wouldn’t hold it for even five minutes.