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Posted on 16 April 2011 | 6,204 views

Sell in May and Go Away Stock Strategy

Investors who followed the Wall Street saying to “Sell in May and Go Away” have avoided some of the “Biggest Stock Market Plunges” in the Dow Jones Industrial Average Index in more than four decades.

The “Sell in May” strategy was first noted in 1986 by the Stock Trader’s Almanac, which found that $10,000 invested in the Dow Jones Average from May 1st through October 31st since 1950 left investors with a loss of $1,522. A $10,000 investment in the DJIA benchmark from November 1st to April 30th led to a gain of about $88,000, according to the Almanac, started by Yale Hirsch and now edited by his son Jeffrey Hirsch.

The traditional seasonality maxim, ‘Sell in May and Go Away’, calls for buying stocks on November 1st and selling on May 1st of the following year.

Another study in 2008 at the New Zealand Institute of Advanced Study, which focused solely on the U.S. stock market, concluded that all U.S. stock market sectors and 48 and out of 49 U.S. industry sectors performed better during the winter months than summer months in their sampling of data from 1926-2006.

Now we have to wonder if the “Stock Market Will Crash in 2011” — given the stock market has experienced a substantial rally since March 2009, it’s certainly something to be aware of.

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