Should You Sell in May? Read This First – The Motley Fool 04-30-12

Salient to Investors:

“Sell in May and go away; come back on St. Leger’s Day” strategy originated in London.

Ned Davis Research found that $1000 invested in the S&P 500 on 04-30-50 grew to $75,539 if sold in May and bought  back in October versus $1032 if bought in May and sold in October – excluding dividends and earnings on parked cash, and taxes on short-term gains and transaction costs.

From 04-30-26 to 03-31-12, the S&P annual return, including dividends, of the “Sell in May” strategy was 8.4% which outperformed the 5.1% for the Buy in May and Sell in October strategy, but underperformed the 10% for a  Buy and Hold  strategy. Both the “Sell in May” and Buy and Hold strategies had identical Sharpe ratios.

The primary consideration when investing in stocks should be valuation, not the calendar.

US stocks are overvalued.

Read the full article at http://www.fool.com/investing/general/2012/04/30/should-you-sell-in-may-read-this-first.aspx