"Sell in May" - Understanding Its Impact on Finance and Investment Markets

1. What is "Sell in May"?

"Sell in May" refers to an investment strategy followed by financial professionals worldwide. When adhering to this principle, investors sell their stocks to secure cash positions in early May and only resume stock purchases in November.

This investment approach gains support based on the observation that stock markets tend to underperform during the period from May through October.

In Vietnam, the "Sell in May" effect is less prominent. This is because the local stock market doesn't allow short selling and implements regulations to stabilize trading bands.

2. Origins of "Sell in May"

The "Sell in May" adage reportedly originated in 17th century England. The complete original proverb states: "Sell in May and go away, and come on back on St. Leger's Day." St. Leger's Day marks a famous horse racing event held annually in mid-September in England.

This saying advised English investors, aristocrats, and bankers to leave bustling London for the countryside during the hot summer months. They would enjoy horse racing activities before returning to the stock market toward year-end.

In the United States, some investors adopt a similar strategy by limiting investments between Memorial Day (May) and Labor Day (September).

3. When did "Sell in May" become widespread?

The term "Sell in May" gained popularity around the mid-20th century. For over half a century, this theory has been clearly demonstrated in the US stock market. According to Forbes statistics, from 1950 to 2013, the Dow Jones Industrial Average showed an average return of only 0.3% during the May-October period.

In contrast, the November-April period recorded an average increase of 7.5%. Based on these statistics, investors who applied the "Sell in May" strategy by participating in the market only from November and selling all stocks before summer would generate more profits than those who only participated during mid-year.

However, this investment strategy isn't universally endorsed. According to Barron's market research, over the past 30 years, an investor following the "Sell in May" strategy would only gain 0.7% more annual profit compared to an average investor. This profit margin might be even lower or potentially result in losses when accounting for taxes and transaction costs.

4. Does "Sell in May" apply to crypto markets?

According to market price statistics spanning 13 years (excluding 2024), there have been 7 years with price increases in May and 6 years with price decreases. This translates to approximately 54% of May months showing price increases and 46% showing price decreases.

Based on this data, we can conclude that the "Sell in May" strategy is difficult to apply to cryptocurrency markets.

5. Exercise caution

It's important to recognize that strategies from one market cannot always be applied to another.

• Specifically, we cannot mechanically apply stock market investment strategies to cryptocurrency markets.

• Similarly, we cannot directly transfer technical analysis theories from stock markets or Forex to crypto markets. Each market has its unique characteristics. While basic knowledge may be common across markets, application requires flexibility.