Why 'Sell In May' Is Costing You Alpha—And What To Do Instead

Forbes

20-05-2025

Don't Sell in May—Rotate and Win While Others Run
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'Sell in May and go away.' It's catchy. It rhymes. And it's wrong. Every year, investors consistently repeat this worn-out mantra, as though calendar-based investing still holds a place in the market. But markets don't respond to folklore; they respond to positioning, liquidity, and catalysts. Smart investors don't retreat; they rotate. This strategy is particularly effective when the market appears dull. Dullness conceals value, while catalysts incentivize discipline. At The Edge, we don't trade seasonality; we track triggers. Spinoffs, insider activity, and management shifts don't care what month it is. And in quieter markets, they often go unnoticed... until they don't. Such behavior isn't about timing the market. It's about sharpening focus while others lose theirs. That's how real edge is built.
It may be one of the most overused phrases in market folklore, but its staying power says more about investor psychology than performance. Originating in 1930s London, the strategy leans on seasonal averages showing the Dow historically performed better from November to April. Yet those averages mask the nuance. The phrase ignores the real forces that drive markets: liquidity shifts, monetary policy, valuation resets, and shifting narratives. The idea that investors can rely on a calendar cliché is dangerously simplistic. Markets don't move because it's May; they move because positioning, catalysts, and context align. The phrase may rhyme, but it won't build alpha. Slogans don't earn you money. You receive compensation for recognizing their falsehoods.
The mantra assumes weakness where there may be none. Yes, May–October have underperformed on average, but averages mask what matters. Often, what looks like a 'sell in May' underperformance is simply lower volatility, not worse returns. And in the post-2009 QE era, the historical basis for the event has weakened dramatically. Since 2020, some of the strongest rallies have occurred during this so-called off-season. The truth is, 'sell in May' thinking ignores how much market structure has changed. In today's environment, dominated by AI-driven narratives, rate path uncertainty, and geopolitical crosswinds, the calendar has never been less predictive. Smart money isn't rushing to sell in May. It's rotating, repricing, and positioning for what's next. Here, some of our best catalyst-driven returns came precisely when the herd leaned on seasonal complacency.
'Sell in May' might be the mantra for the passive crowd, but seasoned investors know better. When others retreat, smart capital rotates, not out, but into opportunities with identifiable catalysts. These include upcoming spinoffs that prompt forced index rebalancing, insider buying that signals internal conviction, activist campaigns pushing for value unlocks, and overlooked restructurings or leadership changes. None of these are seasonal; they're structural. 'Sell in May' thinking misses the mark entirely. At my company, we track these moments obsessively. While the headlines slow in May, the filings don't. One of our most profitable calls emerged during a quiet summer: a spinoff buried in fatigue, which we captured for a 40% return in just two months. That's the power of conviction over the calendar. 'Sell in May' might tell you to wait it out, but our results show the edge comes from leaning in when others step back. You don't need movement in the S&P to make money. You need movement in business.
The phrase endures because it's simple, and simplicity is comforting. But markets are anything but simple. This saying survives not because it works, but because it offers a shortcut in a world where shortcuts rarely pay. Investors cling to it like a seasonal ritual, hoping an old rhyme will shield them from complexity. But the truth? Calendar-based exits aren't a sign of discipline. They're a sign of impatience. Here, we've spent over two decades ignoring market folklore like 'sell in May' and instead tracking real business catalysts, spinoffs, restructurings, insider buying, and corporate change. These drivers of value don't care what month it is. They unfold in filings, not in headlines. Relying on seasonal maxims to protect capital isn't risk management; it's superstition disguised as strategy. If you are committed to achieving returns, it would be beneficial to prioritize conviction over the calendar.
I tighten my focus. While others switch off, I screen for underfollowed spinoffs, track insider buying during thin-volume weeks, and hunt for structural dislocations the market isn't pricing in. May isn't a warning; it's a filter. It strips out the noise and reveals where the edge lives. Last summer, we flagged a forgotten industrial spinoff—trading below net cash, underowned, and ignored. A minor operational shift flipped the story. We captured a 40% return in under 90 days. That's what happens when you act on catalysts, not calendars. 'Sell in May' assumes nothing worthwhile happens in the quiet. But here, we've built our process around quiet moments, where filings still flow, but headlines don't. This process isn't about market timing. It's about business timing. If May makes you nervous, you're watching the wrong signals. But if you're tracking what the business is doing, May isn't a risk. May presents an opportunity.
'Sell in May' might sell headlines, but it rarely builds portfolios. Markets today aren't seasonal; they're situational. The true advantage is in identifying business changes ahead of the crowd, rather than waiting for a calendar queue. At The Edge, we don't guess; we follow the process. While others chase noise or switch off in May, we go deeper: into filings, restructurings, and overlooked spinoffs that quietly reprise risk and reward. Some of our best returns came when the market looked dull. If you feel that May is quiet, that's a positive sign—it indicates that opportunity is knocking, albeit softly. If you're still selling in May, you're not managing risk; you're avoiding strategy. Let's fix that. Let's talk.