The St Leger Day adage
Investing, do I stay or do I go now….! (I’m sure that’s a song)
There is a well known investment saying that investors should sell in May and don’t return until St Leger Day in September. The belief that City folk would be generally away from London – and the stock market – between May and the late summer celebration of St Leger Day led to this popular maxim.
For those interested, The St Leger Stakes is a Group 1 flat horse race open to three-year-old thoroughbred colts and fillies. It is run at Doncaster over a distance of 1-mile, 6 furlongs and 132 yards (2,937 metres), and it is scheduled to take place each year in September.
Solely on the basis of recent history (20 odd years in the UK) investors might just as well flip a coin to determine whether or not sell in May will work in any given year.
One could argue therefore you might as well stay invested throughout the summer months.
Furthermore, there’s the cost of trading in and out of the market to remember/consider – frequent dealing can be expensive and eats into your returns.
Another interesting question is whether the end of summer is a sensible time-prompt for anyone out of the market in the summer. Looking at some historical events can suggest that timing your post summer holiday dive into investment is risky because many of the most famous stock market crashes have occurred during a September month.
The attack on the pound happened in September 1992
Market plunge following the September 2001 World Trade Center attacks
The collapse of Lehman Brothers in 2008 was a September event
October is also hardly more encouraging. The 1929 crash happened in October as did Black Monday in 1987.
So is market timing just a mug’s game – who knows!