The stock market has a famous saying of “Sell in May and go away”. Should you be doing it this year?
A look at the KLCI index from 1994 to 2010 shows that there is a 50-50 chance that the market will go down from May to Oct. The performance of the KLCI index is shown in the table below
| Entry Date | Entry Price | Exit Date | Exit Price | % Change |
|---|---|---|---|---|
| 4-May-94 | 1040.44 | 4-Oct-94 | 1126.34 | 8.26 |
| 3-May-95 | 944.55 | 3-Oct-95 | 983.75 | 4.15 |
| 3-May-96 | 1184.97 | 2-Oct-96 | 1135.53 | -4.17 |
| 5-May-97 | 1099.39 | 2-Oct-97 | 794.10 | -27.77 |
| 5-May-98 | 627.56 | 2-Oct-98 | 366.88 | -41.54 |
| 4-May-99 | 681.75 | 4-Oct-99 | 680.33 | -0.21 |
| 3-May-00 | 900.14 | 3-Oct-00 | 704.24 | -21.76 |
| 3-May-01 | 615.98 | 2-Oct-01 | 613.00 | -0.48 |
| 3-May-02 | 795.12 | 2-Oct-02 | 648.53 | -18.44 |
| 5-May-03 | 627.62 | 2-Oct-03 | 738.98 | 17.74 |
| 6-May-04 | 845.74 | 4-Oct-04 | 855.74 | 1.18 |
| 4-May-05 | 895.50 | 4-Oct-05 | 924.98 | 3.29 |
| 3-May-06 | 950.99 | 3-Oct-06 | 968.93 | 1.89 |
| 4-May-07 | 1346.37 | 2-Oct-07 | 1361.03 | 1.09 |
| 5-May-08 | 1274.13 | 6-Oct-08 | 1013.39 | -20.46 |
| 4-May-09 | 999.44 | 2-Oct-09 | 1204.20 | 20.49 |
| -76.74 |
If you buy into the KLCI on May 2009 and sell on Oct 2009 instead, you would have seen gains of 20.49%. However if you sum up the performance from 1994 to 2010, you will be down 76.74%.
So should you be a buyer this May or seller? Personally, I will not be a buyer as my feel is the index will not see double digit percentage gains and the risk of a correction is high.
