Should you sell in May?

07 July 2021

3 minute read

The ‘Sell in May’ effect is an alleged seasonal pattern in equity markets, where it’s claimed that returns from November to April are stronger than the other half of the year. But is it true, and what should investors do?

Who's this for? Confident investors.

What you’ll learn:

  • What is the ‘Sell in May’ effect?
  • What history tells us about the effect.
  • What investors should do.

As share markets in the US set new record highs, investors may be wondering whether they should follow the much-touted advice to ‘Sell in May and go away’. We think this would be a mistake.

The ‘Sell in May’ effect, also known as the ‘Halloween Indicator’, is believed to be a recurring pattern in share markets, where it is claimed that returns from November to April are stronger than the other half of the year. If true, it would follow that investors can outperform a simple buy-and-hold strategy by selling stocks at the beginning of May and buying them back at the end of October.

Crunching the numbers

To test for the existence of the ‘Sell in May’ effect, we compared the monthly returns across 19 different share markets during the May-October (‘summer’) period and the monthly returns during the November-April (‘winter’) period between 1970-2017. Based on the findings, we discovered that the monthly returns were, on average, 1-2% higher in winter than in the summer period. This indicated that investors would have earned, on average, 6-12% more through the whole winter period than the summer. Note that past performance is not a guide to future performance.

Opportunity cost

Given that there is evidence for the ‘Sell in May’ effect, should investors sell off their share holdings and park the proceeds in cash between May and October? We don’t think so.

Importantly, share returns still tend to be positive over the summer months, but are lower compared to returns during the winter. Therefore, investors risk losing out if they come out of the market for half of the year. Over time, the effects of this opportunity cost (the benefit that is missed or given up when an investor chooses one alternative over another) can be significant.

A timing strategy that buys shares during winter and shifts all assets to cash during the summer would have underperformed a simple 60% (in shares)/40% (in bonds) buy and hold strategy. In short: literally selling in May and going away isn’t profitable because markets haven’t gone down on average over summer months; they have just gone up by less.

We would always advocate time in the market rather than trying to time the market. The longer you’re prepared to stay invested, the greater the chance your investments will generate positive returns.

'Best' days

In any case, we would always advocate time in the market rather than trying to time the market. The longer you’re prepared to stay invested, the greater the chance your investments will generate positive returns. That means holding your investments for at least five years, and preferably much longer. During any long-term investment period, there will always be periods of volatility and uncertainty but it is vital not to be distracted by short-term performance, or let your emotions take over your decision-making. A buy-and-hold investment strategy is likely to serve you best for any long-term goals.

Furthermore, by staying invested, you also won’t risk missing out on some of the best days in markets. In fact, missing out on just the best five days of performance over the past 20 years would have meant leaving the equivalent of 1% per year on the table; missing the best 30 days, over 10% (based on an investment in the MSCI World Price Index in US dollars from January 1998 to March 2019). This underscores the importance of staying invested throughout the cycle – disciplined, long-term investors are rewarded. Remember though that past performance is not a guide to future performance.


If you sell in May and you are wrong, not only do you miss out on gains but you also incur transaction costs that further increase the damaging effect of your decision. If you sell in May and you are correct, you will clearly feel good for missing market losses. However, one of the most difficult things for investors following market falls is to get back in. The emotional impact of seeing losses, and the fear that the falling markets may not have run their course, tends to make investors nervous to commit to buying back their investment. This is also hugely damaging as you may spend too long out of subsequently rising markets. Also remember that whether you are correct or not, you will miss out on some dividend income that also helps boost your total return.

Ways to invest

Without perfect foresight, the best investment strategy will always be to stay invested in a diversified portfolio suitable for the level of risk you are comfortable with and need to take on. Stay engaged with the markets and the associated economic and political developments, but earn your reward by staying invested.

The Barclays Ready-made Investments is just one example of a diversified fund which allows you to select the level of risk you are most comfortable with. This multi-asset fund invests across a range of asset classes and regions, offering a globally diversified one-stop solution for investors.

Alternatively, the Barclays Funds List may help you to narrow down the wide range available to invest in. These funds are selected by Barclays investment specialists and, based on our research, they’re the funds that we believe have the potential to generate consistent returns over the medium to long term.

However, remember that portfolios usually benefit from a diversified approach to investing.

You should only be thinking about holding these investments for at least five years as they’re designed for the long term.

All of these investments can fall in value as well rise; you may get back less than you invest.

These are our current opinions but the future, as ever, is uncertain and outcomes may differ.

Find out more about our Ready-made Investments.

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The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.

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