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Should You Sell in May?

Wealth Daily's Weekend Edition

Written by Briton Ryle
Posted April 7, 2012

Last year, the S&P 500 peaked on May 2 at 1,370.58.

By early August, it had dropped nearly 20% and was testing support at 1,100...

It took the S&P until last February 2012 to get back to that 1,370 peak.

In 2010, the S&P 500 hit an intra-day high of 1,219.80 on April 26.

By early July, the index hit an intra-day low of 1,010.91. That was a 17% decline — and it took until November for stocks to regain their April highs.

Yes, since the stock market bottomed on March 9, 2009, the simple “sell in May” strategy has been pretty darned effective.

So it’s a pretty safe bet that we’re going to hear a lot more about the “sell in May” phenomenon. And we can assume that a lot of investors are going to have itchy trigger fingers poised over the “sell” button.

In fact, based on the price action we’ve seen following the Fed’s recent statements about QE3 — that it may not be necessary — we might suspect investors are playing it safe and not waiting for a late-April/early-May exit point.

But is selling out of stocks just because it’s April really "playing it safe"?

How to Play it Safe — and Still Grow Your Wealth

Bernard Baruch is credited with saying the main purpose of the stock market is to make fools of as many men as possible.

And it’s times like these, when investors become convinced of what’s going to happen next, that the stock market tends to do the exact opposite of what’s expected.

Now, I’m not saying that stocks will continue to rally — even though I can make a strong case for it.

And I’m not saying a multi-month 20% correction is at hand, even though there are risks out there.

What I am saying is that you can avoid the entire question of whether a correction is at hand, and simply keep your investment account growing larger and larger, every month... 

Dividend Payments are at Record Highs

Companies on the S&P 500 will pay out more than $23 billion in cash dividends this year. That’s a record.

What’s more, dividend payments are increasing at the fastest pace in a decade.

Right now, investors have an incredible opportunity to lock in rock-solid dividend payments that run as high as 15%.

On top of that, some of the top dividend payers are cutting checks to their shareholders every month.

I’m sure I don’t have to tell you that cash payments go a long way to offsetting any downside the market might have in store for us...

And if the stock market keeps rallying, well, the dividend stocks will rally, too.

Dividend investing really is the best of both worlds.

Good investing,

Briton L. Ryle
Analyst, Wealth Daily

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