Contributed by: Angela Palacios, CFP®
Questions arising during this election year have prompted me to revisit an old topic. This election year seems anything but average (or at the very least entertaining), but what happens when you layer in the old debate of whether it is a good idea to, “Sell in May and go away.” Will this election year be different?
Markets tend to have their stronger performance between October and May, which, despite a major bump in the road during January and February this year, has certainly held true in the past year.
There are many theories as to why this could be true:
- Investors tend to fund their IRA accounts either early or later in the year.
- There could be lower summer productivity for business.
- And the most obvious, people prefer to be outside rather than inside investing their money (especially in Michigan).
However, this year could be different. If you look at monthly returns in Election years the above picture is contradicted.
Strategies involving the short-term timing of the markets usually end up hurting investors rather than preserving or boosting returns, so take caution.
I am often asked if investing should be held off until after the election during years like this. However, I believe experience teaches us that we are better off if we keep our voting and investing decisions separate.
Angela Palacios, CFP® is the Portfolio Manager at Center for Financial Planning, Inc. Angela specializes in Investment and Macro economic research. She is a frequent contributor to The Center blog.
Source: The Big Picturehttp://www.ritholtz.com/blog/
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