I remember reading this adage a very long time ago and it has since been a question I have often asked of myself. But I have never acted upon this information and simply allow my share portfolio to ebb and flow in accordance with general market sentiment. Which normally means my share portfolio loses money during May. Oh goody, look it is May 1!

My share trading history has proven time-and-time again that the month of May is not a great time to be invested in the stock market, but stay invested I remain. Taking affirmative action is not on my mind at a time when maybe it should. My personal portfolio of shares has declined 8 times in the last 11 years during the month of May (I have only kept rigorous performance records since 2004). Not damningly conclusive by itself I grant, as my emotions and bad decisions could cause this behaviour without any outside influences.

Sell in May and go away – true or false?

To see what the bigger picture is I decided to look at the statistics that the Australian Stock Exchange keep on this matter. To wit I found this end of month data of interest.

I extracted this into a spreadsheet and found some quite interesting correlations. I must first restate the usual disclaimer that past performances should not be used as a predictor, and that I am not an accountant, and that this is not financial advice—yada yada… I am just looking at trends in past performance of an accepted index about which I had no influence.

Low and behold, the last dozen years of stats (2003 to 2014 inclusive—being the only ones available to me) for the end-of-month value of the ASX All Ordinaries Index does indeed show May to be historically a bad trading month, but November may even be worse. November has seen a negative performance eight times making it statistically worse than May with its five negative instances. June and January are revealed as the only other months with historically negative results. April, July, and December shine out as the historically best months. Interestingly, these three best months combine to be 75% of the entire gains for the twelve years.

If I was unscrupulous I may try to sell some share trading system based on these statistics. Could even combine it with option trading puts during the bad months. But as I said before, past performance and future predictability and all that. But geez, if it only was this simple. As an example of how these past performances do not accurately predict the future: April (statistically the equal best month with an average 1.7% gain)  saw a fall of 1.1% during 2015.  I suppose I could exclude this stat from my sales pitch 😃

The following table shows a summary of the data I collected. To put this into perspective, the ASX All Ordinaries was 2975.5 at the end of December 2002 and rose to 5388.6 by the end of December 2014 (after a roller coaster ride through 2008—the Global Financial Crisis) for an overall 81% rise.

Spreadsheet of month by month ASX data

 

For anyone interested in the complete set of figures that I calculated from the ASX reported month-end values, please see below. Click on the image to see in full size.

The GFC (during 2008) really is evident in these figures with a notable, and almost complete, bounce back during 2009.

Spreadsheet of month end values

 



Share this on social media
Facebooktwittergoogle_plusredditpinterestlinkedinmail


Follow D. A. Cunningham
Facebooktwittergoogle_pluslinkedinyoutube