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Why you would have been wrong to ‘sell in May and go away’

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Any investor who followed the old investment adage of “Sell in May, go away come back again on St.Leger day” would have found themselves out of pocket this summer, despite all the uncertainty around Brexit.

The St.Leger horserace takes place this Saturday (10 September) and according to Fidelity Investments, the rises which have taken place between May and September should go along to debunk the old myth that investors would be best served taking time out of the stock market during the summer months.

Indeed Fidelity analysed the returns for the FTSE All-Share between 1 May and 1 September since 1980 and found that the index produced positive returns over these months in 24 out of 37 years.

This means, says Tom Stevenson, investment director for Personal Investing at Fidelity International, that investors would have lost out on the majority of occasions had they been out of the market.

“When it comes to stock market adages, the St. Leger Day adage is a bit of a non-starter. Our figures show that investors would have been worse off 65% of the time had they followed this adage since 1980.

“Even though this summer has been punctuated with uncertainty as a result of the EU referendum and the shock Brexit vote, the FTSE All-Share has gone on to deliver positive returns between May and September, so anyone who followed this adage this summer would be left out of pocket.”

The myth follows the idea that many of the City’s top professionals spend a good deal of that time out of the office to enjoy a summer of sporting activities. This has led to the belief that the summer months are a dangerous period for investors, with a high incidence of market sell-offs.

However for Stevenson, predicting the best time to be in and out of the market is nigh on impossible and he cautions that trying to time the market and getting it wrong can severely dent your investment returns.

“It’s far better to focus on your long-term saving goals and stay invested and if there is one adage that investors should abide by it is ‘time in the market matters more than timing the market’,” he says.