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There Are Dangers With ‘Selling In May And Going Away’

Even in a bull market, plenty of investors have pondered and even followed the “sell in May and go away” strategy.

That is, get out of the market in May and return sometime in the fall. Historically, summer is a weaker period of time for stocks.

But weaker doesn’t mean negative, as UBS analysts point out.

In fact, since 1928, May-August returns have clocked an annualized return of 2.3%, according to UBS.

“An investor who put $100 into the S&P 500 (^GSPC) in 1928 and followed a “sell in May” strategy (shifting out of equities into 3-month Treasury bills from May through August) would today have an investment worth $5,800. But $100 invested in 1928 would be worth more than $16,000 today if invested over the whole period, almost three times as much,” UBS analysts wrote, led by Mark Haefele, global chief investment officer at UBS Wealth Management.

This speaks to the difficulty in timing the market, especially for long-term investors.

“We continue to advocate the importance of staying invested for the long term and focusing on time in the market, not timing the market,” UBS said.

And with the S&P 500 up 17.4% year-to-date and continuing to hit record highs, investors may feel even more pressure to lock in profits now.

But UBS isn’t classifying stocks as expensive.

“Stocks are fairly valued rather than expensive,” UBS wrote. “The trailing price earnings ratio for the S&P 500 is currently 18.1x, close to its 20-year average of 18.3x.”