May is always an interesting month in investment management. We will hear “sell in May and go away” more times than we should. There is no right answer for everyone but some sound reasoning behind not doing it for the sake of doing it.

Susan

Investments are purchased for a reason and should only be sold when that reason no longer exists. These reasons are yours and should be uninfluenced by the media or other outside stimuli.

The most popular reasons for buying investments are growth, value, momentum and income. It stands to reason that said investment would be sold when it no longer meets same objective based on measures used when purchased. Here are some examples:

Growth – consider selling when consecutive quarters disappoint on earnings, estimates of future growth are lowered or price-earnings ratio gets above 45.

Value – value investments are normally bought when it is believed that the book value of the company is more that present price reflects. In other words, it’s on sale. Should valuations rise above prevailing market levels, consider selling.

Momentum – some investors use technical analysis based on historical prices and present momentum. This rule-based decision making process will clearly tell you when to sell. If you used technical analysis going in, use it on the way out.

Income – people need income and many investments are chosen for their dividends or interest payments. It’s fairly easy to know when to exit these positions. You do it when dividends are lowered or an interest payment is late or missed. Cash flow statements should be monitored on these.

Please remember each time you hear “sell in May and go away” that it’s not logical to do so unless your original reasons for buying the investments in your portfolio have actually gone away. This doesn’t happen as often as you may think.

If you have any questions on how to measure the above referenced guidelines, please reach out. I’m here to help.

From Monday, May 23rd until Monday, August 8th, the offices will operate on an appointment only basis Monday through Thursday of each week. To schedule an appointment, please call (480) 836-2326 or email susan@linkousgroup.com.