6 Sayings Investors Should Ignore

Investors can hear advice from a variety of sources—not just the financial professionals they choose to work with. Friends, family, the media and even questionable viral videos can provide what might sound like wise counsel. But inaccurate information could actually hurt your chances of achieving your investing goals. Below are six investing "words of wisdom" that have been around for a while. You may stumble across them and wonder whether they have merit. Let's set the record straight.

1. Sell in May and Go Away

The Truth: This financial adage encourages investors to avoid a period of market decline in the spring. With this strategy, an investor sells stocks in May and reinvests in November, after what has historically been a volatile period.

There used to be some basis for the idea. From 1950 to 2013, the Dow Jones Industrial Average showed lower average returns from May to October, compared to November to April.¹ However, since 2013 it hasn’t held true. Even if returns were still lower starting in May, there can be some real disadvantages to this type of market timing.

Sell In May?

The catchphrase dates back centuries when London bankers and merchants "went away" and spent summer months in the country. Its premise doesn’t hold up anymore.

We advocate a long-term view of investing instead and believe there is success from time in the market, rather than timing it. In addition, buying when stock prices are lower may help in the long run. Also consider that selling investments can result in tax implications, or transaction fees if you work with an advisor.

2. Don't Invest When the Market Is Down

The Truth: It’s not the smartest guidance, but it is understandable. Watching markets plummet may be scary and the uncertainty of volatile markets may make you want to pull your money out. Unfortunately, this is a mistake many investors make.

It sounds counterintuitive but buying when markets are falling can be a smart investing strategy. Plus, if you pull your money when markets are falling, you could experience a loss.

These Strategies Have More Merit

Buy right and sit tight: Include a mix of investments in your portfolio that fit your goals and risk tolerance.
Keep emotions in check: Stay calm and keep a long-term view. Remember that normal market cycles go up and down. Keeping your goals in perspective can help you ride out volatility.
Look for opportunities during market declines: Buying when markets are down actually means you could get more shares for your investment and be in a better position when markets recover.
Weather the storm: Having a diversified portfolio can help with this. When you have a mixture of investment types in your portfolio, it helps balance out losses because when one type falls, others may show results.

3. Stocks Are Risky; Invest in Bonds

The Truth: This may sound like a good idea, especially if you don't like a lot of risk or you're newer to investing. But you also may not get the returns you want, and you could jeopardize your investing goals if you don't have enough growth potential. A variety of investments are necessary for a well-balanced portfolio, and each investment type has its place.

Stocks and bonds can work in harmony: Stocks potentially offer long-term growth opportunities, while bonds may offer a more immediate income stream. While stocks are generally riskier than bonds, avoiding them could mean missing out on potential growth in your portfolio.

Bonds and Future Purchasing Power

A bond-only portfolio may also put your future purchasing power at risk because of inflation. There are several approaches to help combat inflation risks, but all start with the diversified approach mentioned above. That means you include a healthy mix of stocks and bonds. The amount of each depends on your individual goals and how you feel about risk.

4. You Don't Need Professional Financial Advice

The Truth: Whether you seek guidance from a professional depends on your investing needs, how much you want to be in control and how much you trust your investment decisions. In the age of do-it-yourself financial websites and applications, many circumvent a financial professional altogether.

While someone with an economics or finance degree may be able to perform solo with success and certainty, we find that most clients are looking for help, even if it's to validate their decisions or their plan.

DIY investors who aren't familiar with sound investment strategies may run the risk of an under-diversified portfolio and misconceptions about the markets. Or they could miss out on comprehensive financial planning, a good sounding board or resources that can help them make more informed decisions.

5. You Should Have Multiple Financial Advisors to Stay Diversified

The Truth: Needing multiple advisors may be a misconception of diversification. Spreading your investments across multiple advisors does not guarantee that your investments will be diversified. It may just mean a variety of, maybe even conflicting, investing styles to understand, more paperwork and the added stress of keeping track of which advisor manages what.

For true diversification, you need a big picture view of all your assets. Consolidating your investments² with one person or team of professionals from one firm may have some noteworthy benefits, such as making it easier to see where you have overlaps in investment types or potential gaps in your portfolio. Plus, it can take less time and make managing your investments more efficient.

6. Behold, the January Effect

The Truth: The January Effect is a stock market rally hypothesis that supposedly takes place after investors sell off in December to ease tax burdens and then purchase them back at lower prices. While there is some historical credence to the year starting off with increased market activity—which some attribute to bonuses being invested or investors thinking the new year is a good time to get their financial house in order—the theory does not always hold true.

Choose Your Plan Instead

Stick to your own financial plan rather than try to take advantage of events that may or may not happen.

Seek Wisdom From Trusted Professionals

While investing wisdom can come from multiple sources, sticking with professionals you know and trust—and who also have a proven track record—is likely the best place to seek guidance.

Have a question for one of our financial consultants? We’re here to help.

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¹ Sell in May and Go Away, Investopedia.com, April 2021.

² Consolidating investments may have potential consequences, such as taxes, penalties, charges or specific fees for liquidating or transferring your assets.

Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.

Generally, as interest rates rise, the value of the securities held in the fund will decline. The opposite is true when interest rates decline.

Diversification does not assure a profit nor does it protect against loss of principal.

This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.