Jan 19, 2018 5 min read

Can These Classic Market Adages Help You in Becoming Rich?

Nuggets of the investment strategies by the folk wisdom.
People around the world love to throw aphorisms, and so does the folks in investment market. They keep sharing adages from their good and bad experiences of investing which further become helpful for the herd of investors. But, do you think it’s that easy? Absolutely not! Nothing is free from bad effects.

Excess of sweet too can become dangerous for your health. The rookie investors, the roadside Romeos of the market, also push in their individual thoughts which, however, help them cross the river effortlessly but do not stand ideal for the retail investors. So, it becomes crucial for the retail investors, those who travel their investing journey based on the sayings, to ensure that the wisdom could really help them go smoothly with their investments.

The Mirror Image of Investing Axioms - Is there anything to like this? Do they really help to take a right investment decision? Here are some of the popular nubs of the investing wisdom, and the truth behind them:

“Sell in May and Go Away”

Before we head toward breaking down all the nuggets of the popular adage, i.e., "Sell in May and go away," let us tell you one thing that it really works for the stock investors. However, it doesn’t work well in all years but still, if you see on an average, it’s a healthy piece of advice to make smart moves in the market. Don’t worry mutual fund investors! We’ll also tell you that whether it is helpful to you or not. Let’s first understand what it actually mean!

It is one of the old-aged adages which provides a commitment to the stock investors to ‘Sell in May and go away.’ According to this saying, the six months from May to October typically shrink on gains than the six months’ travel of investment from November to April. It advises the stock investors to take buying decisions during the winter season, i.e., the November and sell during the summer, i.e., May. However, this strategy has proved to be fruitful for many stock investors, but it’s still a seasonal strategy and does not work every year. It is also called the ‘Halloween Strategy Investing.’ Let’s check how it can be helpful in mutual fund investing!

There is a famous saying which goes like; mutual fund investors must cheer, not fear the Halloween. Breaking it up more clearly, just after the Halloween celebration, November starts and the month or the so-called six month season of gain starts. So, the investors can decide to initiate their investments in mutual funds during the gaining six months of the year to get welcomed with healthy profits. But, remember one thing that this wisdom worked excellently for many years but did not in every year. So, your decision should not blindly target 1st of November to start investing.

"Don’t Fight the Tape"

It is one of the famous maxims in the world of finance. According to it, the investors should not go against the trend, i.e., don’t fight the tape. The tape referred here is about the ticker tape which is used to transmit the stock price. Many iconic stock investors have asked the herd not to fight the tape. But how far it stands worthy, let’s dig it out!

According to some of the winners of the old times, fighting the tape makes no sense for the investors who have defined and achievable targets. Fighting the tape mostly looks like contrarian stance of investing, which is not everyone’s cup of tea. Contrarian investing can help one to become best of all at a certain time but posses a high degree of risk too. It is hard to say that the above-mentioned maxim, ‘don’t fight the tape’ can help you become rich. However, it is undoubtedly an excellent strategy for the conservative investors. But, to win the race, you need to fling the case, i.e., adopt contrarian nature. Remember one thing that contrarian investing is not really everyone’s cup of tea, because only the tough one can only survive the earthquake. Let’s check that how this strategy can be helpful for the mutual fund investors!

The unwritten maxim of investing implies that the investors shouldn’t go against the herd. However, it is a healthy move in the case of mutual fund investing because of many reasons and one of the major is that investors don’t have control over asset allocation of the fund. The fund managers manage the portfolio of the schemes. So, rather than putting weight on the contrarian feel, better to focus on requirements when you are investing in mutual funds.

Final Showdown: Should You Really Rely on the Two Maxims As Mentioned-Above?

Like the T&Cs which are applied to any service or product you buy, these investment maxims also hold some of the conditions to work for you. It means that they have at least some truth to them. But, these conditions are not like that of the services, they describe the situations. The adages are made by the wise folks who have experienced first, and then threw these maxims. So, one cannot say them incorrect. But again, they might have experienced the situations in a particular time and at a certain market force and strategy. So, it might be possible that the maxims can work again in a similar manner for someone else if the time period and the market condition matches. In the final touch up, all that we have to say is, don’t ever make them the basis of your investment strategy. Well, they work great but only to some criteria.

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