Don't Stay Away in May, Play the Volatility

"Sell in May and go away" is an old Wall Street adage. But, following that advice may not be to your advantage.

The advice to sell in May and get back into the market in November has some merit. Since 1950, the May through October period has returned 2.5%, while the November through April stretch has returned 7.9%.

While you shouldn't sneeze at adding 2.5% to your annual return, there are other good reasons to not blindly follow this old chestnut. Investors have to consider their comfort level and ability to "time" the markets. Getting back into stocks in the fall, just when volatility usually picks up, can create hesitation and cause investors to remain sidelined too long. Of course there are also tax considerations when getting in and out of positions. There are dividend payments to collect on some of your holdings, don't forget about that.

But, there's a way for you to have your cake in May and eat it throughout the summer, and now is a great time to do it.

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