You’ve probably heard the old adage: “Sell in May and go away.” It’s a nice little rhyme, and it does have a basis in the market’s seasonal patterns. Historically, the stock market has typically been weaker from May to October than it has from November through April. Going back to 1950, the Dow is just about flat May to October but up over 7% on average from November to April.
We’ve certainly seen plenty of summer and fall selling over the past few years, and many investors are understandably gunshy, wondering if history will repeat itself this year.
So is selling in May the answer?
Not for me. Instead, I believe investors should rotate instead of pulling out of the market completely.
I don’t recommend trying to time the market based solely on historical patterns. It’s just not worth it. There have been plenty of exceptions to the rule through the years, so getting out of stocks is plenty risky in and of itself because of what you might miss. Instead, keep expanding your positions in areas of the market you like — just make sure to wait for the right price. And if you are convinced that a company can grow faster than the economy as a whole, it may end up being a bargain.
Remember, don’t panic if the market does begin to rotate or correct. If you sell at every dip, you can end up missing rebounds and being cheated out of a solid overall performance.
If you’d like some ideas about what to buy now, make sure to check out my video from Fox Business. I talk about where I think investors should put their money to work, including specific stocks I like right now.