Every year, the same old market saying gets dragged back into the spotlight: “sell in May and go away.”
It sounds simple. Sell before the quieter part of the year, avoid any weakness, and come back later. But investing is rarely that neat.
For long-term investors, the better answer is usually to keep buying as normal.
Why selling ASX shares in May can be risky
The problem with selling based on the calendar is that markets do not follow a script.
Some years, May can be weak. In other years, markets can continue rising. The same applies to the months that follow.
Selling ASX shares because of an old seasonal rule creates a new problem: deciding when to buy back in.
That second decision is often harder than the first. If the market rises after selling, investors risk missing gains. If it falls, they still need the confidence to reinvest while headlines are negative.
Staying invested keeps the plan simple
Most investors are not trying to win one month or one quarter.
They are trying to build wealth over years. That requires consistency more than perfect timing.
Continuing to invest regularly in ASX shares means each purchase becomes part of a long-term plan. Some will be made when prices are high. Others will be made when prices are lower. This is often referred to as dollar-cost averaging.
Over time, that discipline can matter more than trying to guess which months will be stronger or weaker.
Volatility can create opportunity
Market weakness is not always something to avoid.
For investors still building their portfolios, pullbacks can provide better entry points into quality ASX shares and ETFs. If the underlying investment case remains intact, lower prices can make future returns more attractive.
This is why staying active through uncertain periods can be useful. It keeps investors focused on businesses and valuations rather than seasonal sayings.
The better approach with ASX shares
Selling in May might sound clever, but it can easily become a distraction.
A more practical approach is to keep buying quality ASX shares like Goodman Group (ASX: GMG) and Wesfarmers Ltd (ASX: WES), stay diversified, and focus on long-term goals.
Markets will always have weak periods. The challenge is not avoiding every one of them. It is staying consistent long enough for compounding to work.
The post Should you sell in May and stay away? appeared first on The Motley Fool Australia.
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More reading
- How to invest $10,000 for passive income in superannuation
- How to shave a decade off retirement with 3 ASX stocks and ETFs
- Are Wesfarmers shares a good buy for passive income?
- Why I’d buy and hold these ASX 200 blue-chip shares for at least 5 years
- 10 excellent ASX shares to buy in May
Motley Fool contributor James Mickleboro has positions in Goodman Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goodman Group and Wesfarmers. The Motley Fool Australia has recommended Goodman Group and Wesfarmers. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.