This is an old Wall Street adage. It reflects observations from bygone eras when not much happened over the summer months. Also, there have been many corrections that start in September and bottom in October. The adage implies that being able to buy back in then offers great opportunity to pick up bargains and start a new investment cycle. However, careful observation belies any consistency in this pattern. In today’s 24/7 always connected, always on world, seasonality really does not exist.
Then there is the problem of taxes. Except in qualified accounts, such as IRAs and 401(k)s, transactions are taxable events. Just selling and buying twice a year would make it impossible to achieve long-term status for tax purposes; long-term is a holding period of at least one year. Even if one does have long-term status, the best capital gain is still one not taken with continual compounding of return. Also, in the Bull’s over 42 years of experience, he has noted that trying to be too cute in timing the market more often leads to diminished, not enhanced returns.
So, Riverplace Capital is not selling in May to go away. We are always looking for opportunities to upgrade or enhance portfolios as part of our investment process regardless of the season. Stay steady my friends.
The Lonely Bull