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Hello. My name is Ted Ohashi and this is How I See It
Well, it's early May and by now you've probably heard the old stock market chestnut, "sell
in May and go away." What does this mean? Many investors believe the stock market generally
does better between November and April and does relatively poorly from May to October.
So shall we look at some studies to prove to us once and for all if the stock market
performs better from November to April? In fact I did a quick review on the Internet
and found several studies. One showed that 'sell in May and go away' far outperformed
owning stocks from May to October in the last 15 years. Another showed that since 1871,
buy and hold outperformed either strategy. In other words, as I've said in the past 'statistics
don't lie but statisticians do." You can use numbers to prove whatever you want.
Looking at such studies are, in my opinion, not only of little value but possibly dangerous.
Examining such statistics might convince you to do the wrong thing and produce investment
losses instead of gains. Besides if such an anomaly did exist in the stock market, the
fact that investors begin to adjust their buying and selling to take advantage of it
will have the effect of eliminating the pattern. People would rush to sell around the end of
April or the beginning of May and drive prices down. And they would rush to buy in late October
or early November and push prices up. The result is that the market would be lower in
early May and higher in late October meaning the profit would be made by those who "buy
in May and go away."
As I've said here in the past, just because one series seems to relate to how the stock
market performs doesn't mean one causes the other. And even when it makes sense that they
are related, the forecasts are often still wrong.
Let me sign off with a warning because the next thing you are going to hear about are
the 'summer doldrums.' This refers to the allegation that the stock market takes a swoon
in the summer and picks up again after Labour Day. Here's what I have to say about summer
market trends: 'Some 're up and some 're down.'
From the offices of Investmentpitch.com, I'm Ted Ohashi.
If you agree with How I See It, please tell your friends. Or if you want to tell me how
you see it, send me an email at Ted@investmentpitch.com or follow me on Twitter at @TedOhashi