Sell ​​in Summer

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Sell ​​in Summer is an investment strategy for stocks. It pursues the goal of using seasonal fluctuations to achieve better performance than the overall market, which is represented by an index .

method

According to the sell-in-summer strategy, on October 1st of each year the investor buys an exchange-traded fund (ETF) that tracks a stock index (e.g. the DAX ) one-to-one. The ETF is sold on July 31 of the following year without the investor responding in any way to events on the stock exchange . Investors stay away from the stock market in August and September. The sales proceeds from July 31st will instead be invested in a money market account until September 30th . The investment cycle starts again on October 1st. There is no stock selection. Investments are always made in the overall market.

background

The background to the investment strategy is the long-term average monthly performance of important stock indices. For example, since its introduction in 1988, the DAX has shown a positive average development for all months except August and September. In contrast, it lost an average of 2.2% in August. In September the loss even averaged 3.3%. A similarly noticeable weak phase in the months of August and September can be proven for almost all major stock indices in a back calculation. The sell-in-summer strategy is based on the assumption that this historical anomaly will continue in the future.

success

In the long term, the strategy has usually yielded better results than an uninterrupted investment in the overall market. If one considers longer investment horizons (e.g. 20 years), an outperformance of the strategy compared to the underlying stock index can be proven for a very large number of periods. A DAX custody account set up in 1989 according to the sell-in-summer strategy would have produced an annual return of 14.4% by 2013 , while an investor with a continuous investment in the DAX would only earn 7.6% per annum would have.

However, this fundamentally positive balance should not be viewed as a guarantee of success. First, the strategy aims only to outperform the underlying stock index. In other words, if a portfolio built up according to the Sell ​​in Summer strategy loses less than the overall market, this negative result for the investor is rated as a success of the strategy. Second, the strategy has only been able to show its superiority over the indices if it has been used for many years. With shorter investment horizons, there are often phases in which a portfolio built according to the sell-in-summer strategy developed worse than the overall market. Third, the advantageous nature of the strategy in the past is no guarantee of future developments.

distribution

In 2005, Deutsche Börse created its own index , the DAXplus Seasonal Strategy Performance Index, which reflects the sell-in-summer strategy. There are also investment certificates based on the strategy.

The sometimes popularly popular stock market adage Sell-in-May is based on the observation that a weak stock market development is to be expected regularly in the summer months.

criticism

The Sell ​​in Summer investment strategy was only able to statistically demonstrate its advantages over longer investment periods. But there is no justification why the strategy has worked in the past. As long as this causal relationship has not been found, the question of whether the strategy can also be expected to outperform in the future cannot be answered seriously. The summer vacation time was often cited as a possible reason for the success of the strategy, during which lower sales are regularly made on the stock exchange. However, since the lower sales affect both the supply and the demand side, this justification cannot be regarded as sound.

literature

Web links

Footnotes

  1. ↑ boerse.ard.de ( Memento of the original from January 3, 2013 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. @1@ 2Template: Webachiv / IABot / boerse.ard.de
  2. ↑ With system to success, p. 16 in: Börse-Online, No. 4 2013, ISSN  0934-8441
  3. ↑ With a system for success, p. 17 in: Börse-Online, No. 4 2013, ISSN  0934-8441