The surge in the stock markets ( S&P new record) this year amidst weak economic fundamentals of high inflation and cost of debt, begs the question..Is it time?

What is the strategy?

The adage “Sell in May and go away” is a well-known investment strategy that suggests investors should sell their stocks in May and reinvest in November to avoid the historically weaker summer months in the stock market. This strategy is based on the belief that the market tends to underperform during the summer months.

History

The origins of this saying date back to the 18th century in England when investors, predominantly wealthy aristocrats, would leave the city for the countryside during the summer months, leading to lower trading volumes and potentially weaker market performance.

The Evidence

One example supporting this strategy is a study by the “Stock Trader’s Almanac,” which found that historically, the period between May to October has shown lower average returns compared to the period between November to April.

S&P 500 no exception

Another example is the performance of the S&P 500 index over the years, which has shown mixed results for the “Sell in May and go away” strategy, with some years seeing significant market downturns during the summer months.

Consider it collectively

While the “Sell in May and go away” strategy is not a foolproof method for investing, it is essential to consider historical trends and market conditions when making investment decisions. Investors should conduct thorough research and consult with financial advisors before implementing any seasonal investing strategies.

Ensuring that these common oversights are  taken care of in your financial planning will considerably improve the outcomes. 

Beneficiary Designation for Pension Fund

One critical area is failing to designate a beneficiary for your pension fund benefits. Trustees typically determine beneficiaries, prioritizing dependents. However, navigating complex beneficiary rules and ensuring the desired recipients are accounted for can be challenging.

Inclusion of RA Contributions in PAYE Deductions

Additionally, neglecting to include Retirement Annuity (RA) contributions in your Pay-As-You-Earn (PAYE) deductions can affect your take-home pay. Despite the opportunity to boost monthly income, adjusting deductions may require navigating administrative hurdles and understanding tax implications.

Nominating a Child as a Beneficiary

Moreover, nominating a child as a beneficiary presents challenges as minors lack legal capacity for financial matters. Policies involving minors often involve legal guardians, introducing complexities in ensuring the intended benefits reach the child as intended.

Attending to these areas in your planning can make a big difference to its effectiveness and efficiency.