The old adage “sell in May and go away” revolves around the belief that the markets experience higher growth from November to April. This idea is not merely superstition – research shows that summer months underperform in more than 35 developed and emerging markets by an average of 10%.
As we mentioned previously, the rush for investors to sell in May and buy in November is the result of one of the greatest myths in investing. So even with the summer months upon us and the Japanese market pullback, I still think it wise to stay invested.
The fact that the U.S. market rallied in the face of the Nikkei meltdown and in a seasonally weak period is telling. One should consider reinvesting cash or dividend income if markets fall another percent or two in the next few weeks.