Sell In May And Go Away

The stock market has a famous saying of “Sell in May and go away”. Should you be doing it this year?

A look at the STI index from 1988 to 2010 shows that there is a 50-50 chance that the market will go down from May to Oct. The performance of the STI index is shown in the table below

Entry Date	Entry Price	Exit Date	Exit Price	% Change
4-May-88	972.70	4-Oct-88	1005.30	3.35
3-May-89	1284.90	3-Oct-89	1388.30	8.05
3-May-90	1465.90	2-Oct-90	1137.20	-22.42
3-May-91	1546.00	3-Oct-91	1359.40	-12.07
5-May-92	1488.70	2-Oct-92	1352.20	-9.17
4-May-93	1790.90	4-Oct-93	2018.10	12.69
4-May-94	2310.60	4-Oct-94	2348.50	1.64
3-May-95	2072.10	3-Oct-95	2120.20	2.32
3-May-96	2404.50	2-Oct-96	2172.00	-9.67
5-May-97	2020.40	2-Oct-97	1945.00	-3.73
5-May-98	1476.40	2-Oct-98	913.57	-38.12
4-May-99	1915.49	4-Oct-99	2056.10	7.34
3-May-00	2162.23	3-Oct-00	1956.15	-9.53
3-May-01	1747.53	2-Oct-01	1329.63	-23.91
3-May-02	1737.75	2-Oct-02	1378.34	-20.68
5-May-03	1310.74	2-Oct-03	1647.74	25.71
4-May-04	1838.53	4-Oct-04	2001.18	8.85
4-May-05	2141.86	4-Oct-05	2305.63	7.65
3-May-06	2643.14	3-Oct-06	2593.59	-1.87
3-May-07	3444.66	2-Oct-07	3826.41	11.08
2-May-08	3147.79	2-Oct-08	2358.91	-25.06
4-May-09	1920.28	2-Oct-09	2657.44	38.39
				-49.16

If you buy into the STI on May 2009 and sell on Oct 2009 instead, you would have seen gains of 38%. However if you sum up the performance from 1988 to 2010, you will be down 49%.

So should you be a buyer this May or seller? Personally, I will not be a buyer as my feel is the index will not see double digit percentage gain and the risk of a correction is high.