Sell in May - and don't forget to come back in September.
That's what a lot of
Why is investing in stocks in September traditionally a good idea and which risks you should be still aware of?
Why this year could be different to the usual and why it also couldn't?
In this article I will show my perspective to this questions and give you a possible bullish and bearish Szenario of how this could play out. Be aware that both directions have a pretty high risk, as the market has a lot of fear in it by time I am writing that.
It's ALWAYS a possibility to keep your powder dry until you feel comfortable with a market or a business that you want to invest in.
And also as always. Nothing here is financial advise.
It's purely educational and I just talk about my own perspective to the market and their risk.
So please also DYOR.
Historically the September is bad Month for stocks. Economy tends to slow down as many company's have a lot of employees in holiday, the general liquidity for the market makers is pretty low and it just seems like psychologically, people have a lot of stuff in their minds during September. Stocks are definitely not one of them. In fact statistically more then 31 out of 35 years the September is a month where stocks loose value. In some years just a little, in some they even grow a little but it's easy to identify the September as a bad month and a possibility good entry point.
The May is usually the month where a lot of dividends are imminent to stock owners. A lot of big company's with high dividends pay out in June and most of them loose the amount of their dividend after paying out the earnings to the owners as a natural correction. This leads a lot people to sell them even before. Usually at the end of may and that's how the Sentence was born.
So what's a possible Bull and Bear szenario for this strategy?
Bullish:
For a long term investor the historical data shows, that this strategy works! Buying the dip in September and hoping for a end of the year rally and being bullish for the upcoming year has been a solid and risk low strategy in most of the last 40 years. Still it makes sense to never settle yourself on only one strategy.
You will not have to manage your portfolio every few days or weeks. You can just set an alert for these two important months and set some entry points that are interesting for your. If the stock reaches the your price target lvl you can just hop in.
Even if you loose like that for a few years. If you split your risk if will statistically be profitable at some point.
This strategy makes only sense with value and dividend stocks. So your risk of loosing all your money is getting a lot lower.
Please be aware: Doing this strategy with meme or hype stocks is nonsense and will most likely not make you money.
Bearish:
The Market situation is difficult at the moment. The FED the American central bank was to late in rising the interest rates, after they underestimated the power of the inflation which economy's all over the world still have to fight.
During this year the 20 percent growth of the S&P 500 was mostly driven by only the biggest 7 company's. The 493 remaining nearly made no gains.
These two factors could be an indicator that the September will just be a kick off into a longer period of very volatile markets that loose liquidity as a lot of big player hide into bonds, which a paying yields at around 5 Percent at the moment.
Remember: Even though it helps country's with high depts to cover their bills in the short term if many people buy bonds, it has a big downside, too.
The interest rates are growing on the long side and if they have to be payed after a period of 10 to 15 years it could even crash a currency completely.
Conclusion:
Be aware of the high risk we have in the market right now into both directions. Everything can happen. We could be in a small correction before a massive bullrun and also be at the beginning of a long lasting recession.
Thanks a lot for reading guys. Your response has been amazing lately.
Enjoy your day, whereever you are.
Cheers
