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Does the Halloween Strategy for Investments Really Work?

Have you ever heard of the “Halloween Strategy?’  Investopedia describes it as a theory that an investor can get better results for stocks between October 31 and May 1 than from May to October. There is also a saying that one should “sell in May and go away” which indicates you should not invest in equities between May and October. As Investopedia observes, “This technique is contrary to the buy-and-hold strategy, in which an investor may ride out down months.”

However, before acting upon sayings and taking this kind of advice, you should look into its history. This strategy may have started abroad in England where the wealthy spent their summers on their country estates and didn’t really keep up with their investments. While Investopedia notes that wealthy in the U.S. also spend their summers away, in some cities this time away is mainly just the month of August. And since these English summers spent away from investing concerns started in the 1930s, one might also question if this still works today when we are connected by the internet. You can ignore technology for months at a time but many of us would have a hard time doing that.

There may be some truth the idea that you can use the Halloween Strategy since some investment professionals also take vacation in the summer and return in the fall  ready to work but Investopedia points out that you can find evidence both in favor of and against this this strategy.

“The Halloween strategy is a timing strategy; and most individual investors are not equipped to implement a timing strategy. In truth, returns can be high (or low) any time of year and unless you know precisely when each will happen, a generalized approach to timing is based more on luck than anything else.”

If you’re not sure if investing advice that you’ve read or heard will work for you, contact a Fee-Only financial planner for help with a personalized investment strategy.