Leave St Leger out of the equation

By Paul Dickson, of Armstrong Watson

Last updated 09:21, Monday, 29 September 2008

Visit the Armstrong Watson website

Favourite: Sixties Icon, ridden by Frankie Dettori, wins the Ladbrokes St Leger Stakes at York racecourse in September 2006. Sadly, there’s no such certainty in the financial world, despite the old St Leger adage

The St Leger is a 230-year-old horse race which marks the end of the flat season. It also gives a clear date for an old financial adage – ‘Sell in May and go away. Stay away till St Leger’s day.’

The thinking behind this saying was that during the summer months all the stockbrokers and investment managers were sunning themselves on a beach in the south of France so it was considered best not to invest your money in the stock market.

It was indeed the case that the investment markets declined during the summer months and not until activity resumed towards the end of September was it wise for investors to return.

In practice, that is not an investment strategy you should rely on, but if you’d followed this advice this year you would have missed the turbulence in the financial markets over the summer months, when the credit crunch had a massive impact on the financial sector

History tells us that timing the markets is not a quick way to make returns – investing after St Leger’s day has little impact because when the markets pick up they generally do so unexpectedly.

Over recent years, you’d have been as likely to miss a stockmarket rally as a fall if you’d sold at the start of the summer, not to mention the costs of trading making a hole in any potential gains.

So is now the right time to go back into the investment markets?

My view is that if you’re investing for the longer term then profits are there for the taking, although we can expect continued volatility in the short term.

As always, investing in stockmarkets is not for everyone, and no amount of historical knowledge can make it risk-free.

What is certain is that the past 18 months, and in particular the last couple of weeks, have raised questions about traditional investment strategies.

In these difficult times there is a greater need to make sure your advisers are reviewing your needs and strategies on a regular basis.

The global economy is a very different place compared to a few years ago and it’s likely that changes to your investment and pension arrangements are needed to keep you on track.

More than just about making money, financial advice is also about protecting your wealth for your future.

If you feel you’re not receiving this kind of pro-active advice, or you simply want a fresh approach for your financial planning, we can offer a service that works with you to keep your future secure.