Can market timing beat a sensible long-term investment strategy?

F&C: Despite all their technical wizardry and financial expertise, investors love a good old-fashioned adage.

One of the favourites - particularly at this time of year - is ‘sell in May and go away', which is usually rounded off with ‘come back on St Leger day'.

This has its origins in the days when well-off English folk - and in particularly City gents - indulged in the pleasures of ‘the Season', a summer-long extravaganza of sporting and cultural events taking in the Henley Royal Regatta, Royal Ascot, Wimbledon and the like. The St Leger is the last English Classic horse race of the year and is traditionally run in September - this year on Saturday the 12th. Having had the summer off, the stockbrokers and fund managers could then re-enter the market without worrying about what had happened to their stocks while they were away.

But in these days of electronic trading, is there any value in adhering to a tradition that dates from a time when all deals were done in person? And what does recent history show about the performance of stockmarkets during the summer months, when trading volumes do tend to be lower?

Looking at capital returns from the FTSE 100 in each calendar year and each summer (1 May to 15 September) from 1989, the picture as to whether investors should ‘sell in May' is far from clear. Over the period there were 10 ‘down' summers (1990, 1992, 1994, 1998, 1999, 2001, 2002, 2006, 2007 and 2008) and six ‘down' years (1990, 1994, 2000, 2001, 2002 and 2008). While there are a couple of aberrations in these figures - 2000 was a ‘down' year with an ‘up' summer, while 2001 may well have been an ‘up' summer had the St Leger been run a few days earlier, before the terror attacks on New York and Washington - it is clear that for the period in question, investors who chose to ‘sell in May' would have been wrong as often as they were right.

Jason Hollands, head of corporate affairs at F&C Investments, commented: "It is impossible to tell in May what will happen over the summer, just as it is impossible to tell in January what will happen over the course of the year. We have seen a big bounce in stockmarkets since the lows of March; that might be a bear market ‘relief' rally or it might be a sign of better things to come, but it is only with hindsight that we will know which one.

"Rather than trying to time the market based on arbitrary sayings, it is better in the long term to stick to a sensible, sustained, regular investment strategy, perhaps using the summer lull to your advantage by buying on the dips when volumes are low.

"Following a regular investment strategy, for example using a savings scheme to invest manageable amounts monthly, allows investors to smooth out the ups and downs of the market. It can also open up the benefits of pound/cost averaging - when prices dip, your monthly contributions will buy more shares, and over time the average cost of the shares (what you actually paid for them) may be less than their average price."

Please bear in mind the value of investments, and any income from them, can go down as well as up and you may not get back the full amount invested.