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Selling in May and buying back on St Leger Day could cost an investor GBP47,627


The old adage suggests investors should sell in May, go away and come back on St Leger Day, but over the longer term this has proved to be a costly investment strategy which would have disappointed investors.

According to research by Hargreaves Lansdown, selling in May and buying back after St Leger Day (16 September) would have left investors in the FTSE 100 better off only four times over the last 10 years (from 1 January 2003 to 31st December  2012).
Further analysis by Hargreaves Lansdown shows that following the old adage could actually be extremely damaging to your wealth.
A buy and hold investor with GBP100,000 in the FTSE 100 on 1 January 2003 would have made GBP47,627 more than an investor who sold on 1 May each year and bought back on 16 September for 10 years.
A buy and hold strategy produced an average annual return of 9.11 per cent on the FTSE 100 from 2003 to 2012. Selling in May and buying back on St Leger day would have reduced this return by over one-third as much, to an annual average of 5.59 per cent.
In 2009 a sell in May strategy would have returned 5.52 per cent, missing out on most of the recovery as the FTSE All Share returned 30.12 per cent that year.
The strategy does not seem to be working this year either. From 1 May to 22 August the FTSE 100 and FTSE All share are up 0.93 per cent and 1.87 per cent respectively, meaning investors would have been better off staying invested. There are still 14 more trading days to go before St Leger day.
Adrian Lowcock, senior investment manager at Hargreaves Lansdown, says: “Over 10 years the results are conclusive: trying to predict when markets will rise or fall is a very dangerous and potentially costly strategy.  Far too much time is spent on trying to anticipate when you should buy and sell investments. It is much better for your financial wealth to adopt a buy and hold strategy and invest for the longer term.
“Investors should think about fundamentals rather than trying to pick the right day to invest. I recommend concentrating on finding the best managers to run your portfolio. If investors are nervous about market volatility they should consider drip-feeding money in through a regular savings plan to give them some peace of mind.”

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