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The FTSE 100 just had its 2nd-best April for a decade. Here’s what I’d do now

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It looked like the FTSE 100 was going to end April back above the 6,000 point level. But hopes were dashed by a 200 point loss on Thursday. The index still ended the month at 5,901 points, up 229 points on the month for a gain of 4%.

It was the FTSE 100’s second-best April in the past decade, beaten only by April 2018. That year, the UK’s top index put on a massive 452 points to reach 7,509 in the month. That’s a gain of 6.4%, a typical year’s worth of growth.

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Here’s what the top five of the past 10 Aprils looked like:

FTSE 100 End March End April Change %
2018 7,057 7,509 +452 +6.4%
2020 5,672 5,901 +229 +4.0%
2015 6,773 6,961 +188 +2.8%
2014 6,598 6,780 +182 +2.8%
2011 5,909 6,070 +161 +2.7%

So, at the end of March 2020, the Covid-19 pandemic caused lockdown, and businesses worldwide faced disruption. A great time to avoid the stock market, right? Clearly not, it turns out. If you’d plonked down some cash on the FTSE 100, a month later you’d be sitting on a nice gain.

Unpredictable FTSE 100

In March, a month in which the FTSE 100 dipped as low as 4,899 points, I really was expecting further carnage to come. So I’m pleasantly surprised. And it does show that trying to predict where the stock market is going to go in the short term is a mug’s game.

Plenty of people do gamble on the FTSE 100, and on individual shares, taking bets on short-term movements. I know that’s rarely a winning game, but I was surprised to read this week that around 75% of all such bets lose money. It’s probably better than the horses, but that’s the only positive thing I can think to say about it.

But back to April. It might have been the second-best April for the FTSE 100 in a decade, but the index recorded its lowest end-of-April level since 2012. That year, the month ended at 5,738 points, the only other April in the decade that finished below 6,000.

Only twice in the past decade has the FTSE 100 lost ground in April, with a 1.6% fall in 2017 and a 0.5% dip in 2012.

Time to sell?

What should we do now? Avoid the FTSE 100 now the ‘Sell in May‘ thought is upon us? Well, if you’re going to choose any time to sell, the end of April might indeed be the best. According to analysis by Money Observer, since 1970, April has been the best month for UK shares. At the time of the study, the FTSE All-Share index had averaged 2.6% in gains each April over nearly 50 years, though that’s dipped to 2% since 2000.

April 2020 seems to have continued that tradition, but I think there are several good reasons to avoid selling now.

Once you consider the costs of selling at the end of April and buying back some time later, together with any tax liabilities you might crystalise, I just don’t see the point. April is volatile too, so that adds extra risk. The likelihood of happening to hit enough years when it’s sufficiently profitable to make it worthwhile seems too low to me.

And do you really want to be selling at the lowest end-of-April level for the FTSE 100 for the past eight years? I’d just keep investing regularly, every month, regardless of historical statistics. Keep doing that for decades, and I reckon you’ll be heading for a financially sound retirement.

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