Forget The Cliche! Here's Why You Should Stay

During the first week of May every year, the maxim, “Sell in May and Go Away,” gets taken out, dusted off and powered up as a reason to sell stocks. The rhyme is more than just a catchy urban legend: June, July, August and September have historically been the weakest months of the year for the S&P 500 Index.

Yet even if seasons trigger certain events, when the snow falls in Minnesota in May, Midwesterners need to throw on their winter gear and roll out snowblowers, not lawnmowers.

S&P Streaks
Consider this encouraging research: The S&P 500 has been rallying for six months in a row, which has happened 48 times since 1950. Following these six-month winning streaks, stocks have historically continued rising. Sixty percent of the time, the S&P 500 climbed 0.79 percent over the next month; 84 percent of the time, stocks increased 3.50 percent, 7.77 percent and 11.77 percent the next three, six and 12 months following the streak.

Spring Clean Your Treasury Portfolio Too
With the Fed’s insistence to keep interest rates low, real interest rates remain negative for investors. For example, a 90-day T-bill yields 0.06 percent and 2-year Treasury yields 0.23 percent, but inflation burns off 1.5 percent.

It’s interesting to note that while low interest rates help keep the government’s debt payments low, these rates hurt seniors living on a fixed income. My friend, Terry Savage writes this week,
“Savers are the big losers in this rigged game. And most domestic savers are seniors and those approaching retirement, who planned to live on the income generated by their savings. Today, that’s simply not possible – unless they are willing to take on a lot more risk.”

Here’s an alternative that offers both a shorter duration and higher yields, without a lot of risk: The Near-Term Tax Free Fund (NEARX) has a tax-equivalent yield of 1.51 percent as of March 31, 2013. Its 30-day SEC yield is 0.81 percent. These yields are significantly higher than a 2-year Treasury.

The important idea for investors is to adjust to the current conditions. Regardless of the month, if the thermostat shows frigid temperatures, dress accordingly. Likewise for when it’s hot in the summer. What’s important is to stay tuned and make sure your portfolio is dressed accordingly.

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Disclaimer:
Please consider carefully a fund’s investment objectives, risks, charges and expenses. For this and other important information, obtain a fund prospectus by visiting www.usfunds.com or by calling 1-800-US-FUNDS (1-800-873-8637). Read it carefully before investing. Distributed by U.S. Global Brokerage, Inc.

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Foreign and emerging market investing involves special risks such as currency fluctuation and less public disclosure, as well as economic and political risk. By investing in a specific geographic region, a regional fund’s returns and share price may be more volatile than those of a less concentrated portfolio. The Emerging Europe Fund invests more than 25% of its investments in companies principally engaged in the oil & gas or banking industries. The risk of concentrating investments in this group of industries will make the fund more susceptible to risk in these industries than funds which do not concentrate their investments in an industry and may make the fund’s performance more volatile.

Tax-exempt income is federal income tax free. A portion of this income may be subject to state and local income taxes, and if applicable, may subject certain investors to the Alternative Minimum Tax as well. Each tax free fund may invest up to 20% of its assets in securities that pay taxable interest. Income or fund distributions attributable to capital gains are usually subject to both state and federal income taxes. Bond funds are subject to interest-rate risk; their value declines as interest rates rise. The tax free funds may be exposed to risks related to a concentration of investments in a particular state or geographic area. These investments present risks resulting from changes in economic conditions of the region or issuer.

The S&P 500 Stock Index is a widely recognized capitalization-weighted index of 500 common stock prices in U.S. companies.

Written By: Frank Holmes