Consider This Before You "Sell in May and Go Away"

How would you like to take a six-month vacation?

It seems everybody is all geared up for spring break this month. But if you're a buy-and-hold [2] investor, get ready to take the next six months off.

You may have heard the Wall Street [3] cliché to "sell in May and go away." It may be a cliché, but it works...

The six-month period between May and November is historically the worst-performing period for the stock market [4]. According to the Stock Trader's Almanac, buying the S&P 500 on May 1 each year and selling on November 30 would have generated a negative return [5] over the past 60 years.

Not every year was bad, of course. Since 1950, the period between May 1 and November 30 has been positive 60% of the time. But the losses during the down years eclipsed the meager gains of the up years.

There's a lot of potential risk for holding stocks through this period, and not much potential reward. This is why it makes sense for longer-term investors to "sell in May and go away."

But shorter-term traders should stick around.

Volatility often picks up between May and November. So short-term traders have plenty of opportunities to profit [6] from both the long and short sides of the market.

Think about what we've seen over just the past two years. The S&P 500 hit its 2011 high last May, and it formed an intermediate-term top in May 2010. Traders could have made 20% or more by shorting the S&P 500 each year. Readers of Growth Stock Wire were forewarned here and here.

The S&P 500 also made important intermediate-term bottoms both years between May and November. Anyone who took our advice last October saw huge gains within just a few weeks. We saw equally impressive gains following a buy signal in June 2010.

My point is that long-term investors should heed Wall Street's warning to "sell in May and go away." Enjoy your profits so far this year. Take a few months off. Come back in November ready to buy.

Traders, on the other hand, are heading into a volatile environment filled with opportunities to profit from both the long and short side.

A six-month vacation sure sounds relaxing. But as a trader, I'd rather stick around and make lots of money.