Every time they enter stock exchange trading in May, observers, brokers, including retail stock players always pay close attention to one form of market anomaly that is believed to occur every year, namely: Sell in May and Go Away (Sell shares in May and then save cash).
Why is sell in may and go away always being talked about in May? Is it true that this market anomaly always occurs when entering the month of May? Before I go deeper, it's a good idea to study the causes of sell in may and go away.
Sell in may and go away comes from the United States. Analysts in America try to invest a capital of USD 1,000, then calculate how much return on the S&P500 in 2 periods:
1. Invest in shares in May, and sell in October.
2. Stock investing in November, and selling in April
As a result, the investment in May only yielded a return of US$32 in 62 years and when investing in November, the return obtained in the same time was US$74. That is, the analysts assumed that the cause of the low return in May was because in the month of May many investors who sell shares (sell in may).
Okay, then what about Indonesia? Based on the analysts' observations, sell in may and go away occurred because in May there was not much positive sentiment in the Exchange, there was not much happening. There are several assumptions that underlie the sell in may and go away:
1. The positive sentiment of the first quarter financial report (April) is over
2. The annual dividend distribution is usually announced before May, so that the stock price rises in the previous months, and in May there is profit taking
3. May is the month before school holidays, so many people choose to use their money for vacations rather than trading.
These assumptions are valid, and if we look at the theory, it is quite reasonable why investors sell a lot of shares in May. But, what about in practice? In practice, "sell in may and go away" is often not proven. Do not believe?
For example, in May 2016, there was a lot of fear of panic selling because 'he said' in May the stock market was usually bearish. But in fact the stock market in May 2016 still followed the JCI movement in the previous 4 months (January-April).
Where in May 2016, the stock market actually started to rise slightly, but was still dominant sideways. Also read: Why Do Stock Markets Often Panic Selling? But precisely in 2016, in May 2016 I got the biggest stock return compared to other months. This indicates that sell in may and go away still cannot be proven accurately, at least for the Indonesian stock market.
So, what should you do when you enter the month of May?
The answer is, you don't need to panic, let alone panic selling. In May, you can still print returns, as long as you have a good trading plan and are able to do objective analysis, don't gamble on the stock market, and aren't easily tempted by unclear rumors, I'm sure you can still get a positive return (profit) in May.
