Wednesday, May 1, 2013

Sell in May and go away Statistics and Excel Sheet

Since it's now May 1st, it's an appropriate time to once again bring up my Sell in May and go Away Statistics.  Here's a table that I made in Excel some years back which I update every year; I divide the table into 3 columns going back to 1950 starting with a $10,000 investment.  The column on the left shows what would happen if you took $10,000 and invested it into the Dow Jones starting from 1950 only in the 6 month time frame between May 1st to Oct 31, while the second column directly to the right shows the results if you invested your $10,000 in the other 6 month time frame from Nov 1st to April 30th, while the column on the right shows a simply buy and hold. 

The results are quite astonishing!  $10,000 invested ONLY in the May 1st to Oct 31st time frame every year starting from 1950 actually LOST MONEY!! Your $10,000 turned into $9759!  Obviously this is minus dividends and interest of course, however this is astounding because as you can see, the same $10,000 invested in the opposite 6 month time frame from Nov 1st to April 30th grew to $918,000!!  Also notice that the buy and hold turned into $758,000.  

What this tells you is that historically most of the market gains were made in the the 6 months time frame from Nov 1st - April 30th!

I also include two visual charts on the right to really put this into perspective

It's now May 1st, will this play out once again this year?  This phenomenon has played out the last 3 years to a certain degree with big sell offs in the May time frame, we shall see.

If you would like a copy of this Excel file, simply send me an email or join Breakpoint Trades

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