Market timing
About ten years ago, I decided to put to the test the statement that the markets are now priced so efficiently that you could use a pin to select your shares. I decided to pick ten shares randomly from the FTSE 100 and use the adage, ‘Sell in May and go away, don’t come back till St Leger day.’

These were dummy portfolios and I tracked their progress each week. The shares would be ‘bought’ in September – the week following the running of the St Leger – and ‘sold’ in the first week of the following May. I use spreadsheets to track share prices and, although my portfolios do not include dealing costs, they similarly exclude any dividends that might have been paid.

The portfolios have always shown a profit, albeit some very small ones in bad years, but these are only over an eight-month period. For the remaining four months the funds could be on deposit.

What do you think the odds are that, if I try it for real, I will come a cropper?

Mike Lake, Hull

Angus Rigby replies:

There are many anecdotes, theories and superstitions associated with timing the market. These adages usually correspond to traditional market cycles.

The St Leger day example you give here prompts investors to sell their stock in spring, when many expect the market to dip for the summer, then buy in October when traders return from their summer breaks and the markets come back to life.

This has proved to be a popular investment strategy in the UK, but in the past few years the adage has not yielded consistent results. For example, in 2004 stock market returns were only 0.3 per cent over the four summer months – so going away until the St Leger would be a good decision – but in 2003, the stock market rose 10.2 per cent, primarily due to the end of the Gulf War.

In today’s competitive global markets, the St Leger’s Day adage looks outdated. The days of long summer breaks are very much a thing of the past.

Angus Rigby is chief executive officer at TD Waterhouse