Sell UK stocks in May and go away? No thanks!

Dr James Fox explains why he believe it’s a mistake to follow the old investment strategy of selling in May. Instead, he’ll buy more UK stocks.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young black man looking at phone while on the London Overground

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Some investors may feel the need to sell UK stocks in May. Not because they’re performing poorly, or because it’s time to take their gains, but because of that old adage “sell in May and go away“.

The term is based on an investment strategy that suggests the summer months (between April and October) are significantly weaker than the winter months.

Typically, in such a strategy, investments are sold in late spring and the proceeds held in cash for the duration of the summer. Investors then return, typically around Halloween, and invest for the winter.

So why am I ignoring this strategy? Let’s take a closer look.

Is it still true?

The thing about old adages is they don’t always hold true. And over the past three years, looking at the FTSE 100, it’s clear that investors would have missed out on plenty of growth and would have experienced several corrections if they’d followed a ‘sell in May’ strategy.

The 2020 lockdown correction took place in March, and so did this year’s Silicon Valley Bank (SVB) engendered correction. There have also been periods of strong growth over the past few summers.

It’s not just the UK either. The FT Wilshire 5000 is a stock index that tracks the performance of virtually all publicly traded companies in the US. Since 2002, it would have outperformed a ‘sell at the end of April and buy on Halloween strategy’ by some distance.

One could argue that leaving your money invested throughout the summer months is more risky. But that’s only on the basis that the cash is invested half as often and is therefore less likely to impacted by a crash or correction.

Is this year different?

We’ve already seen quite a lot of movement in stocks this year. There was a real rally in January and February, and this was followed by a correction in March after SVB’s failure. But every year is unique, so it’s hard to compare 2023 with 2022 and further back.

Why buy now?

I’m ignoring the adage. I’m continuing to buy stocks for my portfolio because I’m continuing to find value, especially on the FTSE 100 and FTSE 250.

One reason for this is the March correction that hit financial stocks harder than most. Some companies, including Barclays, saw as much as 20% wiped off their share prices. Barclays and its banking peers have recovered somewhat, but I still think there are excellent buying opportunities.

UK banks weren’t widely appreciated before the market slumped. But the correction has seen its valuation metrics fall to incredibly attractive levels. Barclays now trades at just five times earnings.

But I’m interested in other sectors too. I think housebuilding stocks have got a lot of growing to do this year, and I expect plenty of this growth to come in the summer.

It’s also true that by selling in May I could miss out of ex-dividend dates during the summer. That wouldn’t be great!

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Fox has positions in Barclays Plc. The Motley Fool UK has recommended Barclays Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

5 steps to start buying shares with under £500

Learn how this writer would start buying shares with a few hundred pounds in a handful of steps, if he…

Read more »

Young happy white woman loading groceries into the back of her car
Investing Articles

The FTSE 100 offers some great bargains. Is this one?

Our writer digs into one FTSE 100 share that has had a rough 2024 to date, ahead of its interim…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

£9,000 of savings? Here’s my 3-step approach to aim for £1,794 in passive income

Christopher Ruane walks through the practical steps he would take to try and turn £9,000 into a sizeable passive income…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

I’d buy 29,412 shares of this UK dividend stock for £150 a month in passive income

Insiders have been buying this dividend stock, which offers an 8.5% yield. Roland Head explains why he’d choose the shares…

Read more »

Red briefcase with the words Budget HM Treasury embossed in gold
Investing Articles

Could the new UK budget spell growth for these 6 FTSE stocks? I think so!

Mark David Hartley considers six UK stocks that could enjoy growth off the back of new measures announced in the…

Read more »

Investing Articles

With a 6.6% yield, is now the right time to add this income stock to my ISA?

Our writer’s looking to boost his Stocks and Shares ISA. With this in mind, he’s debating whether to buy a…

Read more »

Dividend Shares

This blue-chip FTSE stock just fell 12.5% in a day. Is it time to consider buying?

Smith & Nephew is a well-known, blue-chip FTSE stock with a decent dividend yield. And its share price just dropped…

Read more »

Investing Articles

At 72p, the Vodafone share price looks to be at least 33% undervalued to me

Our writer looks at a number of valuation measures to determine whether the Vodafone share price reflects the fair value…

Read more »