Adrian Murphy, CEO of Murphy Wealth, said:
“Selling your stocks in May and then not buying back in again until the Doncaster St Leger’s Stakes horse race in mid-September is one of the oldest and best-known adages in investment. The rationale behind it is that investors would often take the summer off and the lack of activity on stock markets over these months would translate into lacklustre returns.
“While there is some evidence to suggest that it has played out some years, is it really a rule the average investor should follow? Last year was a great example of when it would not have worked out in your favour. Had you done so, you would have missed out on a good deal of the recovery from the tariff shocks in April – the S&P 500 rose more than 18% and the FTSE 100 gained more than 9% from May to mid-September.
“With the conflict in the Middle East, markets are volatile. No one knows how the situation will pan out in the short term, let alone the next few months and beyond. You are as likely to crystallise any losses and be forced to reinvest at a higher price at the end of the summer, as you are to make gains by buying back in again when the market looks cheaper.
“It’s also worth remembering that selling one month, only to reinvest later in the year, is completely counter to other well-known investment adages. Time in the market, rather than trying to time it, is a long-proven approach to investment that would have left many people better off, rather than trying to buy and sell in relatively short periods.
“Timing the market is impossible – and that is essentially what you are trying to do by opting out of the summer. The best days for returns can come at any point and research shows that if you were fully invested throughout the 15 years to 2025, your annual return from the FTSE All Share would have been 7.7%. If you missed the best 10 days, that is reduced to 4.68% and then 2.59%, 0.7%, and -1.04% for the best 20, 30, and 40 days respectively.
“As those figures suggest, trying to optimise your investments often ends up being counter-productive. Invest your money in a risk-adjusted, low-cost, and diversified portfolio of assets, add whatever you can afford over time to benefit from pound-cost averaging, and check how things are progressing at regular – but ideally infrequent – intervals.”
