He said thousands of investors made the same costly mistake every summer
Every summer, thousands of investors repeat the same error.
Markets grow more volatile, headlines blare about sharp swings, and many individuals rush into buying or selling at precisely the wrong moment. However, according to wealth manager Paul Denley, seasoned investors typically take the opposite approach. Rather than responding to every market fluctuation, they understand that summer can be one of the most turbulent – and least dependable – periods for investing.
Paul Denley, CEO at London-based Oakham Wealth Management, said: “Summer markets can be deceptive. With many professional investors away on holiday, it takes less buying or selling to move prices around. That means markets can look much more dramatic than they really are.”
The notion that markets quieten down over summer isn’t novel. The old saying sums this up neatly: “Sell in May and go away, come back on St Leger Day.”
While Mr Denley advises investors shouldn’t interpret the phrase literally to return in mid-September, there is data suggesting that markets frequently behave differently during the summer period.
He said: “Research has consistently found that shares have historically produced stronger returns between November and April than between May and October. But that doesn’t mean investors should rush to sell everything every summer.”
Rather, he argues that affluent investors grasp the distinction between market noise and genuine investment opportunities. He continued: “They don’t let scary headlines force them into making emotional decisions. They focus on the quality of the companies they own, not what the market happens to be doing on a Tuesday afternoon in August.”
Mr Denley pointed out that a common error among everyday investors is believing that every sudden market fluctuation signals a major shift in fundamentals.
He explained: “In reality, summer price swings often happen because fewer people are trading. Prices can move more sharply, but that doesn’t necessarily tell you anything about how healthy those businesses really are.”
As the holiday period draws to a close and traders return to their desks, markets typically become more influenced by corporate earnings and economic data rather than the thinner summer trading volumes. Mr Denley suggests this is precisely why seasoned investors seldom make sweeping changes to their portfolios during the summer months.
He said: “Successful investing isn’t about reacting to every headline. It’s about sticking to a well-thought-out plan and remembering that short-term market swings are often just noise.
“The wealthy don’t try to outsmart the calendar. They know patience usually beats panic. If nothing has changed about the businesses you own, a volatile summer isn’t usually a reason to change your investment strategy.”
