Dog days of summer

In the investment world, theories abound, but one that often works is seasonality. The idea is to “sell in May and stay away,” meaning that the stock market often does not do well during the summer and early fall months.

Some people believe the legend and go to 100% cash from May 1 through Halloween. Others trim equity positions in late April and move significant portions of portfolios to fixed income. The Stock Trader’s Almanac makes a persuasive case that one could have made better returns historically by being in the market from November through April and staying away (being in cash or fixed income) in the summer.

Basic seasonality is described in this blog — there are also variations that encompass holidays, quarterly reports and the like.

If nothing else, it’s time to think about how you want to be positioned in the summer of 2011, right?

Have a great week, and as the old IBM desk sign said, Think.