Switching off in the summer months?

Have you ever heard the phrase “sell in May and go away”? This is a popular phrase in investment circles and implies that there is often a downturn in the stock market during the summer months. This seasonal behaviour is often given as a reason why you should seek to sell all of your holdings in May and then forget about things for the next few months.

When you return in the Autumn, it is to be expected that you will have avoided what otherwise would have been trading losses. Is there any sense to this advice? Almost inevitably, when people come to answer that question they will tend to look at very recent performance levels. If the advice looks to have held good the previous summer, then there are always some who will immediately assume that it is always certain to be correct. By the same token, one great summer might be taken as an indication that it is advice that is best ignored.

There has been some evidence over the years (based upon the Dow Jones Industrial Index) that does suggest that returns are considerably lower during the summer months. Is there any reason for this? Is there strong evidence to suggest why this should be so?

There may be a danger, of course, this has become what is known as a self-fulfilling prophecy. As more and more people withdraw from their holdings during these months of the year, it might be expected that share prices would necessarily fall. There will doubtless be much consideration of whether we see the same being replicated during the coming few months.

What you can certainly expect to see is further discussion of popular trends, phrases and thoughts. That’s what we’re here to bring you.

How do you react when investments go badly?

Before you invest any of your hard-earned (or easily won, for the lottery winners amongst you!) cash on the stock market, there is one thing you should know.

There are no guarantees with the stock market. Even if you are investing in low or medium risk shares, that are expected to make a small but steady profit, you can still end up making a loss; or even losing your entire investment.

Before investing in the stock market, you should be aware that you can lose your whole investment sum, or perhaps even just break even, ending up with the same money that you started with.

Check out stock brokers and the companies that you are going to be investing in, to make sure that everything is legal, above-board and proper. Spending a few pounds on having a lawyer check out a contract will seem like a very worthwhile expense compared to losing all your savings.

However, all this advice is for before you invest. What should you do if you have invested and it has all gone wrong? First of all, check your overall finances and take steps to ensure that you can meet all your immediate expenses. Hopefully, this step will not be necessary as you should never, as the saying goes, have all your eggs in one basket.

Do not allow your one bad experience to embitter you against the stock market. Rather, learn from the experience and choose a wide range of stocks and shares instead for your next foray into the market. If you chose your ill-fated stocks personally, perhaps bow to the greater experience and knowledge of your broker in the matter of choosing the stocks and shares to include.

Whenever you do get your fingers burned in the stock market, make sure that you stay up-to-date with the financial news and be aware of all the clauses and exclusions in your paperwork. If the stocks you invested have failed due to fraud, for example, you may be able to put a claim in when the case comes to court. You may not get all your money back, but getting some of your funds back will ease the sting somewhat!

When making investments do not be dazzled by the possible returns. If any deal seems too good to be true it probably is! Be very wary of conmen, offering great returns on secretive deals.

If someone wants your money honestly, they may indeed want to keep it quiet and hush-hush, but they owe you, their investor, a full and honest disclosure of how your investment will be spent, how quickly they will start making a profit and how quickly you will get your money (plus interest) back again. The same applies to the stock market – if you cannot see or understand how they will make the enormous fortune they are promising it is unlikely to be a good deal for you!

To summarise, if you have lost some money on the stock market you should get straight back in the saddle again. Choose your stocks carefully, giving your broker’s advice a fair hearing, and only invest as much as you can afford to lose – think of the stock market as an enormous casino, where you are having a bet! With that in mind, you are unlikely to go far wrong!