A Balanced Look at This Investment Strategy

The “Sell in May and Go Away” strategy is a well-known adage in the investment world, suggesting that investors should exit the stock market in May and return in November to avoid a period of historically lackluster performance. While this tactic may sound appealing due to its simplicity and historical basis, it comes with both merits and flaws. In this blog post, we’ll explore the rationale behind this strategy, evaluate its pros and cons, and discuss alternative approaches to help you make informed Investment Strategy.

What Is “Sell in May and Go Away”?

The phrase “Sell in May and Go Away” is rooted in the observation that stock market returns tend to be weaker during the summer months (May through October) compared to the winter months (November through April). Historical data lends some credence to this idea. For instance, from 1957 to 2024, the S&P 500 averaged returns of just 0.3% in May, 0.1% in June, and 1.1% in July—well below the annual average return of 10.13% (Investopedia, 2024). The logic often points to reduced trading volume during the summer, as vacations lead to less activity among individual investors, stockbrokers, and institutional managers.

However, this strategy isn’t foolproof. Averages can mask significant year-to-year variations, and recent data shows that summer months can still deliver strong returns. For example, in 2022 and 2023, July and June were among the best-performing months, and selling in May 2024 could have meant missing out on gains later in the month (YCharts, 2025).

Merits of the “Sell in May” Strategy

1. Historical Patterns: The strategy is grounded in decades of data showing that, on average, summer months underperform. Defensive sectors like consumer staples, healthcare, and utilities often outperform cyclical sectors (e.g., technology, industrials) during this period, supporting the idea of a seasonal shift (Fidelity, 2024).
2. Reduced Volatility Exposure: By exiting the market, investors may avoid seasonal volatility, particularly in October, which has a history of significant crashes (e.g., 1929, 1987) and precedes U.S. election-related uncertainty (Investopedia, 2025).
3. Simplicity: For investors who prefer a passive approach, this strategy offers a straightforward rule to follow, requiring minimal market monitoring during the summer.

Flaws of the “Sell in May”  Investment Strategy Strategy

1. Missed Opportunities: Exiting the market can lead to missing significant gains. Between 1993 and 2023, the S&P 500 averaged an 8% annual return. Investors who missed the market’s 10 best days saw returns drop to 5.26%, and missing the 30 best days reduced returns to just 1.83% (CNBC, 2024). Many of these “best days” occur unpredictably, including during the summer months.
2. Market Timing Risks: The strategy is a form of market timing, which is notoriously difficult. Even professional investors struggle to consistently predict market movements, and financial advisors generally discourage such approaches due to their unreliability.
3. Costs and Taxes: Selling in May incurs trading fees and, in taxable accounts, potential short-term capital gains taxes, which can erode returns. These costs can outweigh the benefits of avoiding a flat market.
4. Inconsistent Performance: While averages suggest weaker summer performance, recent years show significant variability. For instance, the S&P 500’s monthly returns over the past three years demonstrate that summer months can be strong, making the strategy less reliable (YCharts, 2025).

Alternative Investment Strategy

Rather than exiting the market entirely, investors can consider these alternatives to capitalize on seasonal trends while managing risk:

1. Sector Rotation: Instead of selling to cash, investors can shift into defensive sectors (e.g., utilities, healthcare) during the summer and rotate back to cyclical sectors in the fall. This approach maintains market exposure while aligning with seasonal trends.
2. Active Management: Active portfolio management involves continuous monitoring and adjustments based on economic and market conditions. This contrasts with the passive “go away” approach and may be better suited for investors willing to stay engaged or work with a wealth manager.
3. Dollar-Cost Averaging (DCA): DCA involves investing a fixed amount regularly, regardless of market conditions. This strategy, often used in retirement plans like 401(k)s, reduces the average cost basis over time and eliminates the need to time the market (Investopedia, 2024). While this is good in some ways, it has it’s flaws as well. 

The “Sell in May and Go Away” strategy has its appeal, particularly for investors drawn to its simplicity and historical basis. However, its flaws—missed opportunities, market timing risks, and additional costs—suggest it may not be the best approach for most. A smartly diversified portfolio with a customized asset allocation, combined with active management or strategies like sector rotation and DCA, can offer a more balanced path to achieving long-term financial goals.

Ultimately, your Investment Strategy should align with your risk tolerance, financial objectives, and time horizon. We can help you explore these options and tailor a plan that works for you.