Back in 1986, The Stock Trader’s Almanac coined the phrase “sell in May and go away” to highlight the seasonal disparity in performance during the warmer months of the year. Many investors looked at the catchy rhyme as a beacon, guiding them to grow their money from November through April before ultimately jumping out when the May showers hit.1
And in some ways, that was the right move. From 1945 to 2025, the S&P 500 has posted average returns of 7% between the favorable winter periods, compared to the weaker 2% jumps seen between May and October.2 And it doesn’t take a Fields-winning mathematician to know that 7% is greater than 2%.
But all this ignores the simple fact that staying invested all year, instead of during specific periods of the year, has historically yielded better average annual returns than 7% or 2%. Let’s take a look.
Why we say “No Way” to “Sell in May”
For most investors, time in the market is more effective (and realistic) than timing the market.
The stock market, after all, is influenced by a seemingly endless list of moving pieces, ranging from government policy, global conflicts, and interest rates to corporate earnings, investor sentiment, and unexpected events. In other words, it’d be easier to solve three Rubik’s cubes while juggling than to “solve” the stock market.
Yet, with so much at play, we’re led to believe that the market simply goes on vacation between May and October. Seems a little too convenient, right? That’s why Wall Street likes to remind us that past performance doesn’t guarantee future results and all investing may lose money. Just because something happened frequently in the past doesn’t mean it will happen like clockwork in the future.
Besides the seeming randomness of selling in May, the strategy also poses a logistical problem. Even if you manage to get the timing right, the frequent buying and selling would rack up additional trading fees, management costs, and taxes.
For example, in a taxable account, selling an investment for a profit in the same 12-month period you bought it would trigger a short-term capital gain, which can reduce your take-home profit by as much as 37%.
But all this aside, ask yourself… “If the market is performing exceptionally well in May, am I really comfortable selling everything simply because an old saying told me to?”
At Motley Fool Asset Management, our ETFs are built with long-term, buy-and-hold investors in mind.
The importance of long-term investing
Everyday people who find success in the markets typically aren’t predicting market movements. More often than not, they're staying disciplined and remaining invested over decades, which allows time to do the heavy lifting.
Doing this over the long-term could give your portfolio more time needed to potentially smooth out any short-term ups and downs. Here’s why.
1. The power of compounding
The real magic doesn’t lie in some mystic market “wisdom”. It comes from the power of compounding. Compounding is why we believe time in the market matters.
The longer your investment time horizon, the more your portfolio can benefit from compounding. Compounding occurs when your principal investment (what you contributed) earns returns, and those returns begin earning as well. It’s the reason why we think investors can be better off investing small amounts regularly when they’re younger than waiting to start investing more when they’re older.
Let’s say in a hypothetical that at age 30 you started contributing $200 a month to an investment account that returns 8% every year. You keep up that same pace for 35 years, until you turn 65. Across those decades, you’ve contributed a total of $84,000. With the power of compounding, however, your portfolio would be worth $413,460.3
Now, let’s say you waited a decade to start investing at age 40. You’ve cut your investment timeline down from 35 years to 25. At age 65, you’ve only accumulated $175,454—less than half what you were able to earn by starting a decade earlier. In fact, to accumulate the same earnings, you’d have to start saving around $470 a month.3 Compounding makes every dollar work harder, and its impact is amplified across longer time horizons.
2. Best and worst stock performance are unpredictable
Another issue with trying to time the market? You never know when the market’s best days will occur.
In fact, no one knows how the stock market will behave tomorrow, let alone in the coming months. With millions of investors worldwide influencing its movements, sentiment can shift drastically—often turning on a dime.
Some of the strongest market rallies in history have happened immediately after major downturns, precisely when many investors felt most uncomfortable staying invested. In a study by Morningstar®, 76% of the stock market’s best-performing days over the past three decades have actually occurred during a bear market. Missing even just 10 of those days would drop your returns by half.4
Keep in mind, market highs can occur all throughout the year, not just between November and April.
3. Long-term capital gains
It’s not just the market that rewards long-term investors. The IRS does too.
When you sell investments for a profit inside a taxable brokerage account, those profits are generally subject to capital gains tax. How long you held the investment before selling impacts your capital gains tax rate.
If you held the investment for less than one year, any profits are taxed as ordinary income, which can reach rates as high as 37% depending on your tax bracket.
Investments held for more than one year qualify for long-term capital gains treatment. Your tax rate will be either 0%, 15%, or 20%, depending on your adjusted gross income.5
Allowing your investments to grow long-term not only increases the potential for compounding growth, but can improve general tax efficiency as well.
When Is the best time to buy and sell stocks?
It shouldn’t be all that surprising to hear us say the best time to start investing is yesterday. The second-best time is now. The sooner you begin, the more time your money has to compound and grow between now and the future.
When’s the best time to sell? That answer is a bit more complicated. Ideally, we believe you sell investments when you’re ready to use the money to support a goal like retirement, buying a home, paying for college, or funding another major life milestone.
But you’re likely to come across other scenarios throughout your investing journey in which selling makes sense. For example, if one investment greatly outperforms the rest of your portfolio, it may become overweighted. Too much of your portfolio’s value gets tied to the performance of that one stock or sector.
In those situations, you may need to sell in order to rebalance your portfolio. Rebalancing can help you keep your investments aligned with your tolerance for risk, growth goals, and time horizon.
How ETFs Help You Stay Invested
ETFs are cost-effective tools for simplifying diversification, making them a popular choice for long-term investors.
Instead of researching and selecting individual stocks yourself, ETFs allow you to invest in a professionally managed basket of investments through a single fund. You gain exposure to multiple companies or assets all at once.
The underlying holdings are selected according to a specific strategy or index and monitored by professional managers. Rebalancing and adjustments happen within the fund itself, which means you don’t have to constantly monitor or manage individual positions on your own.
Staying invested all year round
Markets are notoriously unpredictable, and timing them is consistently difficult (even for professionals). A strategy that encourages you to jump in and out regularly increases your investment costs, taxes, and potential for missed opportunities.
Instead of selling in May (or anytime the market trends downward), consider staying invested long enough for compounding, possibly market recoveries, and long-term growth to work in your favor.
At Motley Fool Asset Management, we designed our ETFs to help long-term investors stay the course through market ups and downs. Check out our complete lineup of ETFs.
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