Come Halloween, plenty of people will be dressed up and pretending to be something they’re not. Some investors just might start doing the same thing… by cosplaying as market-timing geniuses (no costume required).
That’s because the end of October marks the start of something called the “Halloween Indicator,” a seasonal investing theory based on the old saying, "Sell in May and Go Away." And while the strategy may sound good in theory, staying invested all year long may be a better long-term play.
The phrase “Sell in May and go away” is based on the Stock Trader’s Almanac’s claim that the “best six months” of market performance occur between November and April. As of April, 2026, since 1945 the S&P 500 has historically gained about 2% between May and October, compared to around 7% in average gains between November and April.1
An investor following this strategy would theoretically exit the stock market at the end of April, moving money from stocks into something else like a money market fund or other cash equivalents. Come late October, they’d move money back into the stock market and remain invested through the winter and early spring, before selling off again by the following May.
It sounds like a clever shortcut to achieving optimal growth. Why should you remain invested during historically weaker months when you could sit them out and avoid the heartache? Doesn’t watching your money move up and down cause unnecessary stress?
In reality, the market doesn’t move based on what the calendar says. Markets are based on broad investor sentiment, which can be swayed by any number of factors. A big company announcement, geopolitical tension, economic hardship, natural disaster, federal policy changes—these all have the potential to influence market movements at any time of year.
The Halloween Indicator essentially takes the "Sell in May" strategy and looks at it from the other side of the calendar. It is a market-timing strategy based on historically stronger stock returns between roughly November 1 and April 30.
In practice, you would invest in stocks around Halloween, remain invested through April, move out of stocks in May, and then repeat the process each year.
Halloween hardly has a monopoly on strange stock-market superstitions. Investors have spent decades finding patterns tied to everything from holidays to football games. Here are a few other popular calendar-based investment theories:
The January Effect theorizes that stocks, particularly small-cap stocks, historically outperform during January. One possible explanation is the popular year-end tax-loss selling strategy. Investors tend to sell losing positions toward the end of the year and claim the losses on their tax returns. They return to the market in January, pushing prices higher.2
Taxes aside, some believe the effect is based on a mix of investor psychology and excess capital. Some may feel inclined to use their year-end bonuses to boost their portfolio, while others see the new year as fresh motivation to get serious with their money goals.
The Santa Claus Rally refers to the historical tendency for stocks to rise during the final five trading days of December and first two trading days of January. Possible explanations range from holiday optimism and lighter trading volumes to year-end portfolio positioning and holiday bonuses being invested.
The “Super Bowl Indicator” claims that a Super Bowl victory by a team originating from the old NFL predicts a rising stock market, while a victory by an old AFL team signals a decline.
There is, of course, little economic reason why the outcome of a football game should dictate the direction of corporate earnings or stock prices. But as humans, we like patterns, including ones with little predictive value. While the Super Bowl Indicator is an entertaining theory, it does not provide a dependable foundation for making investment decisions.
If you followed the "Sell in May" theory, you would essentially be trying to time the market twice a year, every year. Not only would you have to correctly determine when to leave the market, but you’d have to decide the best time to return. Perhaps more realistically, remember to return at all.
Even professional investors who spend their careers studying markets struggle to consistently make market timing calls.
There’s a reason a "set it and forget it" strategy can be an effective way to approach long-term investing. It gives your money the opportunity to remain invested and compound without requiring you to constantly intervene. Market timing, by comparison, is an active strategy requiring both investment knowledge and the discipline to make the right moves at the right times, year after year.
Intentionally pulling your money out to sit on the sidelines for half the year increases the odds of missing major market movements.
A J.P. Morgan study found that missing just 10 of the best market days over the last 20 years would drop returns from 11% to 6.6%, nearly slicing them in half. Theoretically, if you invested $10,000 in 2006 and stayed fully invested in the S&P 500, your investment would increase to $80,619 by the end of 2025. Miss those crucial 10 days? Your investment’s value drops to $35,866. The more good days you miss, the more dramatic the drop:3
Notably, six of the 10 best-performing days occurred within two weeks of the 10 worst days. In other words, the moments when you might feel most compelled to leave the market can occur remarkably close to the moments you most need to be invested.
You do not have to miss months of market performance for timing to hurt you. Missing a handful of crucial days can dramatically change the outcome, and there’s no guarantee those days will conveniently arrive between November and April.
Frequently moving money in and out of investments comes with another price: Taxes.
When you sell an appreciated investment in a taxable brokerage account, capital gains tax is triggered. Investments held for less than one year generate short-term capital gains, which are taxed at ordinary income tax rates. If you’re moving money in and out every six months, this higher tax rate would likely apply. However, holding an investment for at least one year before selling qualifies it for the lower long-term capital gains tax rate instead.
Keep in mind, taxes are only one consideration here. Depending on how and where you invest, trading costs, bid-ask spreads, management expenses, and other fees may also eat into short-term returns.
Following a “Sell in May” strategy, you would need to outperform the benchmark by enough to compensate for the additional costs and potential taxes involved.
One way to make long-term investing easier is to build a portfolio that requires fewer individual decisions. Exchange-traded funds, or ETFs, can help. An ETF gives you exposure to a basket of securities (stocks, bonds, etc.) through a single investment. Depending on the fund, that could mean owning pieces of dozens, hundreds, or even thousands of underlying investments.
ETFs offer diversified exposure to stocks, which reduces reliance on single-company performance. In addition, they offer relatively low costs, tax efficiency, transparency, liquidity, and easy access to different sectors, asset classes, and investment strategies.
Passive ETFs can provide broad market exposure by tracking an index, while actively managed ETFs rely on professional portfolio managers to select securities and make other important investment decisions.
Either way, a diversified ETF strategy makes it easier to remain invested through different seasons, market cycles, and headlines rather than repeatedly guessing when to jump in or out.
Researching historical patterns can be fun, but past performance offers no guarantee that the next May, Halloween, January, or Super Bowl will behave like previous ones. Trends like the Halloween Indicator only demonstrate how eager investors are to find patterns that might hint at what comes next. In reality, the markets have always been, and will likely always be, unpredictable.
Instead of moving money in and out of the markets multiple times a year, consider the benefits of a simple but disciplined, long-term investment strategy. With the help of ETFs, you can diversify appropriately, keep costs and taxes in check, and give your money time to compound.