Why Investors Should Not Sell in May and Go Away

Over the last 20 years, on average 29 of the best 50 stock market trading days of each year occur between the months of May and November, according to JP Morgan

J.P. Morgan Asset Management 3 May, 2016 | 10:44AM
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Morningstar's "Perspectives" series features investment insights from third-party contributors. Here, JP Morgan Asset Management Global Market Strategist Alex Dryden warns that investors considering taking their chips off the table for ‘Sell in May’ are likely giving up 11% total returns.

If you ‘sell in May and go away,’ exactly where are you going? Super-low bond yields make fixed income investments unattractive in a stagnant environment and risky in an improving one. Meanwhile, current accounts, thanks to incredibly easy monetary policy, are paying next to nothing – certainly not enough to keep pace with even modest UK core CPI inflation. In the 50 years prior to the financial crisis, investors, on average, were getting paid several percentage points above core inflation to sit in current accounts or cash ISAs considering their next move. Today, investors must pay for the privilege.

Forget seasonal savviness – the long-term numbers bear out the benefits of staying invested in equities to grow your pot over the long-term. In real terms, just look at the returns if you’d put £1 to work in the markets back in 1899, today you would have £340. That same £1 kept in cash would be just £3 today. For investors with a long time horizon of more than five years, shares are nearly always a better way to grow their wealth.

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About Author

J.P. Morgan Asset Management  is the investment arm of JPMorgan Chase & Co. and it is one of the largest active asset managers in the world.