'Sell in May...' aka 'The Halloween effect'

[TheMotorcycleBoy]

As usual, if anyone has any opinion on ULVR, GAW, MSLH, NXT or BOY I would welcome your opinions.

Matt

a couple of stocks that I| have topped up recently on the unscientific basis of a) share priced having dropped significantly, b) directors share purchases are VOD & BOY

Thanks TUK, I ended up topping our BOY today. And reopening a ULVR holding.

After those two purchases we have only £855 + divs to spend until April 2019

[TheMotorcycleBoy]

Seeing as Mel and I have been private investors for approaching a year now I started thinking about seasonality again.

One thing I want to get my head round, is just confirmation what I believe is actually a very simple concept, but is sometimes overdressed by market pundits, is when they refer to returns e.g. in here:

http://stockmarketalmanac.co.uk/2016/11 ... 100-index/

The months which have seen the highest number of positive returns are still April, October and December.
The months with the lowest (in fact, negative) returns are still May, June and September.

So when they say "returns" is all they are talking about, just that the market is more or less expensive at those months? That is, following from the above italicised sentences, all they are trying to say is if you buy in April, October or December and then resell 6 months on, you are more likely to make a profit, than if you buy May, June and September and resell after a similar time period?

Sorry to seem awkward/pedantic etc. just wanting to confirm that my interpretation of these journos/writers words is correct.

thanks Matt

[swill453]

I don't know where you get the notion of a six month period from.

It's simply saying that the FTSE 100 is more likely to rise in, say, April than it is in, say, May.

I don't really see it as particularly useful information.

Scott.

[tjh290633]

Matt, seasonality should not concern you. It is far better to stay fully invested as nobody can predict what the market is going to do. External events have far more effect than the seasons, and are always unexpected and unpredictable.

Sit back and enjoy the ride. Remember the mantra "The time to buy is now".

TJH

[TheMotorcycleBoy]

Matt, seasonality should not concern you. It is far better to stay fully invested as nobody can predict what the market is going to do. External events have far more effect than the seasons, and are always unexpected and unpredictable.

Sure, I was just being curious, that's all. And you're right to say best to stay invested - which we most certainly are.

Sit back and enjoy the ride. Remember the mantra "The time to buy is now".

Yes. Indeed. We have made the most of cheaper valuations, throughout Nov 2018-Jan 2019, picking up new positions in stuff we had considered previously (i.e. in the summer of '18) to be too pricey, and we topped up a few of our existing ones.

I know we should be pumping in the cash when we can (i.e. cost averaging) but I can't help but try to plan "buying when cheap".

Whilst I think that you are definitely right when you say External events have far more effect than the seasons, but having said that we humans are emotional creatures by and large, so I can quite understand how folk get gloomy when daylight hours lessen and cheery as they increase.

Furthermore, I was pondering earlier on, that if a lot of companies deliver their EoY updates around Jan and Feb. then negativity will *possibly* set in around Nov/Dec as folk start to doubt (in the absence of any other info) how well their holdings are doing.

These are just thoughts of mine, I'm not planning on launching a time-the-market buying schedule but am just naturally curious!

thanks again, Matt

[Itsallaguess]

Sit back and enjoy the ride.

Remember the mantra "The time to buy is now".

Or, if you are concerned about that mantra, then drip-feed over a longer period....

I'm a great believer that we've got to find our own investment-style, which suits our individual investor-temperaments, and if one of the things that puts you off committing potentially large amounts of capital to the markets in one fell-swoop is the fear of a short-to-medium-term market-reactions that could make you think that you 'made the wrong decision' by 'buying now', then don't be afraid to break purchases up into a number of smaller chunks, as you may find that you're then able to ignore much of the market noise when carrying out such a process, given that you're then likely to have a foot in both camps at any one time, taking advantage next time of a potential market fall now, and taking advantage now of the last purchase, if the market subsequently rose since the last purchase......

One thing I would add though, if you're thinking of drip-feeding into the market over a number of months, is to write down the plan before the first purchase, and STICK TO IT RELIGIOUSLY!!!!

Example -

15th Feb - Purchase £1500 of Stock X
15th March - Purchase £1500 of Stock X
15th April - purchase £1500 of Stock X
15th May - purchase £1500 of Stock X
15th June - purchase £1500 of Stock X
15th July - purchase £1500 of Stock X

Follow the plan - make the trades, and then you'll know that you can execute the idea....

Personally, I prefer to work with plans similar to the above rather than commit the same amount of capital in one go. My portfolio is now of such a size, and the majority of the purchases that I make are generally of such low price-volatility over short-term periods, that it means that in the most-part, the total round-trip 'portfolio performance' will mostly be regarded as noise, if we were to compare the round-trip consequences of carrying out the same complete-trades using either strategy, and that's especially so if we then start to consider looking back at such 'alternative trade methods' at a point years ahead of us - I dare say you won't even be able to see any difference in approaches in the vast majority of round-trip trades....

So then, if the performance-difference is likely to be at 'noise' level over the longer-term, we're simply left with the question regarding what makes either process easier to carry out and live with as individual investors....

I won't go as far as to say that I don't 'agree' with the 'The time to buy is now' idea, but I most definitely know full well that trying to make myself follow that idea doesn't suit me as an investor, and I'm so, so glad that I'm able to maintain my longer-term investment intentions by simply using a slightly different plan that does....

I honestly think that trying to fit a round peg into a square hole, in terms of trying to bend ourselves to follow an investment strategy that simply might not individually suit us, is the single biggest risk to maintaining a healthy approach to long-term investment.....

It doesn't make either strategy 'right' or 'wrong', but it might well make it 'right' or 'wrong' for us as individuals....

Cheers,

Itsallaguess

[kempiejon]

Yes. Indeed. We have made the most of cheaper valuations, throughout Nov 2018-Jan 2019, picking up new positions in stuff we had considered previously (i.e. in the summer of '18) to be too pricey, and we topped up a few of our existing ones.

I know we should be pumping in the cash when we can (i.e. cost averaging) but I can't help but try to plan "buying when cheap"....thanks again, Matt

Matt, let's not worry to much about cost averaging as I'm not convinced about the benefit and unless you're sat on a big lump sum now you're investing as cash becomes available. Having target pries for shares is a plan but they won't always hit them and you'll potentially miss out. If you can crack "buying when cheap" though you'll have it made.

[TheMotorcycleBoy]

I'm a great believer that we've got to find our own investment-style, which suits our individual investor-temperaments, and if one of the things that puts you off committing potentially large amounts of capital to the markets in one fell-swoop is the fear of a short-to-medium-term market-reactions that could make you think that you 'made the wrong decision' by 'buying now', then don't be afraid to break purchases up into a number of smaller chunks, as you may find that you're then able to ignore much of the market noise when carrying out such a process, given that you're then likely to have a foot in both camps at any one time, taking advantage next time of a potential market fall now, and taking advantage now of the last purchase, if the market subsequently rose since the last purchase......

Yes, I agree with you. I guess I'm (Mel is mainly taking a backseat, just helping with a bit reading and research when she gets time) still homing in on a strategy.

I think I went through a slightly over eager (and impetuous) phase last summer, perhaps buying things when they were tad too pricey. That was probably because we were just starting out, and wanted to build up a decent portfolio (I now realise that at times, patience is a virtue!!). But having said that, I dived in quite big Nov-Jan just gone, and now we've had a slight lift of the FTSE350, our total foli has almost broken even again according to the rough +/- % that our platform states. We've also just started unitising and that's helped us to spot both positive progress and understand the "in it for the long term" aspect to the foli.

Matt, let's not worry to much about cost averaging as I'm not convinced about the benefit and unless you're sat on a big lump sum now you're investing as cash becomes available. Having target pries for shares is a plan but they won't always hit them and you'll potentially miss out. If you can crack "buying when cheap" though you'll have it made.

I think I see what you are suggesting. That is, since I don't have a big lump sum (e.g. a big portion relative to total holdings), I should just keep spending whenever, and remain to be mindful of buying cheap if possible.

FWIW this is my current buying approach. Firstly I try to use our a platform's limit buying facility, since sometimes it's hard to time when to buy without feeling pressurised, i.e. a lot of the time (trading hours) I'm either at work, or just got home and hence busy with other stuff. Secondly I ensure I have say £1200 at least in cash in the ISA, and choose say 3-5 shares, and fix a buy limit anywhere between -0.5% and -5% of what they are currently at (as long as my basic analysis, or current opinion suggest the pricing is sane) at say £1200 for each of the 3-5 shares. The idea then is that given time the platform and the market will execute *one* of the purchases sometime over the next fortnight or so, and so I don't really need to worry about things.

Of course, you are right, sometimes the limits won't be hit for any. But I find this, currently, to be a nice simple approach to take.

Matt

[doug2500]

You might be interested in this, although it's small cap focused I doubt there's much difference:

http://www.montanaro.co.uk/smallcap-cor ... -small-cap