Why you should not sell in May

Sell in May is a strategy commonly applied to avoid poor returns - but does the theory still stand strong in 2024 or is it simply a fool's game, says Kalpana Fitzpatrick

Woman watching stock charts
(Image credit: izusek)

It’s an old investment adage - sell in May and go away, don’t come back until St Leger’s Day’ - a well-known British horse race day, which takes place in September. 

But does the ‘sell in May’ theory still hold true and would you be foolish to adapt it in 2024? As my colleague Max King pointed out last week, global equities are proving resilient in 2024. 

It may look tempting as the FTSE hit another record high (7 May) - sunshine and FTSE highs - investors are having a jolly old time. But, could our luck run out? 

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As we head into summer, it is expected that trading activity will slow down, yielding lower returns compared to those we often see in winter months.

But, while this theory may have had legs when trading was an in-person activity, does it still stand today? It certainly is no clever hack that lets you essentially time the market. And in a world where trading is now digital, does trading activity ever really get thinner in the summer? 

What we do know is returns are still fairly strong over the summer and as any good investor will tell you, it is all about time in the market, not about timing the market. So, does it still make sense to sell in May? 

Should you sell in May?

If we are looking simply at returns, you could argue that there are many factors that come into play, but if we look at the returns over 20 years during the months of May to end of September, then the numbers are not as grim as you may expect.

Numbers crunched by investment firm Hargreaves Lansdown, looking at returns for the FTSE All Share index for the last 20 years found that returns were negative over the five-month period (May to end of September) for just six of the 20 years.

According to Hargreaves Lansdown’s analysis, the average return for this five-month period was 1.05%, though there were some significant falls in a few of these periods, including two of more than 10%. 

While timing the market is simply not possible, if you were to adapt the ‘sell in May’ strategy, you would have to be consistent - just as you would with any other investment strategy.

Sell in May - are returns better?

Some more number crunching from Hargreaves Lansdown: lets say I had £1,000 to invest - and I put it to work in the market 20 years ago. I consistently take it out at the end of April, repeating this process each year. 

Taking the money out of the market in 2024, the £1,000 would now be worth £3,526 - and if I had left it invested, the £1,000 would now be worth £4,024.  

Further analysis from investment firm Fidelity going back 37 years shows sell in May has worked in just 14 of the 37 years and failed in 23 years.

Sell in May works when we see prolonged market falls. It worked during the dot com bubble in 2001-2002 and 2007-2008 during the financial crisis. It has also worked in 2022 and 2023 when  markets were volatile. But as the data shows, it fails more often that it works, so it's not always a winning strategy.

Like most investors, we do not know what the summer has in store for us, but we can see consistency and time in the market is what often pays off. 

Will you sell in May?  

Kalpana Fitzpatrick

Kalpana is an award-winning journalist with extensive experience in financial journalism. She is also the author of Invest Now: The Simple Guide to Boosting Your Finances (Heligo) and children's money book Get to Know Money (DK Books). 

Her work includes writing for a number of media outlets, from national papers, magazines to books.

She has written for national papers and well-known women’s lifestyle and luxury titles. She was finance editor for Cosmopolitan, Good Housekeeping, Red and Prima.

She started her career at the Financial Times group, covering pensions and investments.

As a money expert, Kalpana is a regular guest on TV and radio – appearances include BBC One’s Morning Live, ITV’s Eat Well, Save Well, Sky News and more. She was also the resident money expert for the BBC Money 101 podcast .

Kalpana writes a monthly money column for Ideal Home and a weekly one for Woman magazine, alongside a monthly 'Ask Kalpana' column for Woman magazine.

Kalpana also often speaks at events. She is passionate about helping people be better with their money; her particular passion is to educate more people about getting started with investing the right way and promoting financial education.