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Wall Street has been struggling to find a strong footing lately due to Fed’s uncertain policy and global growth concerns. A similar trend is expected to continue in the months ahead due to weak seasonal trends. This is especially true given the old adage “Sell in May and Go Away,” which says investors should sell their stocks in May and re-enter the market in November to capitalize on the historically strong performance of equities between November and April.

"Sell in May and Go Away" is a popular Wall Street adage, denoting traditional market underperformance during summer months (May to October).

Is This a Myth?

The "Sell in May and Go Away" adage cannot be definitively labeled as a myth, as there is historical data supporting the idea that the stock market has generally performed better during the November-April period compared to the May-October period. However, this does not mean that the adage is a foolproof investment strategy, as there are several caveats and limitations to consider, such as market timing, global stock market trends, individual stock performance, tax and transaction costs, and changing market dynamics.

As such, investors might consider several investment strategies to navigate the May-October period more effectively that could lead to a winning portfolio.

Sector Rotation

Rotating the investments into sectors that historically perform well during the May-October period, such as consumer staples, utilities, and healthcare, could be beneficial. These sectors often provide more stability during market downturns and have a defensive nature, making them attractive during periods of uncertainty. The Zacks Rank #2 (Buy) Invesco Defensive Equity ETF (DEF - Free Report) could be an excellent pick. It offers exposure to companies that potentially have superior risk-return profiles during periods of stock market weakness while still offering the potential for gains during periods of market strength.

Investors seeking concentrated exposure to the particular sector could find top-ranked Consumer Staples Select Sector SPDR ETF (XLP - Free Report), Global X U.S. Infrastructure Development ETF PAVE, and Vanguard Health Care ETF (VHT - Free Report) intriguing. All these funds have a Zacks ETF Rank #1 (Strong Buy) or 2, suggesting their outperformance in the coming months.

Dividend Investing

Focusing on dividend-paying stocks can provide a steady income stream and help mitigate potential losses during weaker market periods. These stocks offer the best of both worlds — safety in the form of payouts and stability in the form of mature companies that are less volatile to the large swings in stock prices. The companies that pay dividends generally act as a hedge against economic uncertainty and provide downside protection by offering outsized payouts or sizable yields on a regular basis.

In particular, high-quality dividend stocks with a history of consistent dividend payments and growth can offer both income and the potential for capital appreciation over the long term. Vanguard Dividend Appreciation ETF (VIG - Free Report) and iShares Core Dividend Growth ETF (DGRO - Free Report), having a Zacks ETF Rank #1 each, fits well in this category.

Low-Volatility Focus

Investing in low-volatility stocks can help reduce the overall risk in the portfolio during the May-October period. Low-volatility stocks tend to exhibit smaller price fluctuations and have more stable returns compared to the broader market. ETFs like iShares Edge MSCI Min Vol USA ETF (USMV - Free Report) and Invesco S&P 500 Low Volatility ETF (SPLV - Free Report) that focus on low-volatility stocks can provide an easy way to implement this strategy. These have a Zacks ETF Rank #2 (Buy).

Value Addition

Value investing is an investment strategy that focuses on purchasing stocks that are undervalued relative to their intrinsic value. Value stocks seek to capitalize on the inefficiencies in the market and have the potential to deliver higher returns with lower volatility compared with their growth and blend counterparts. These are less susceptible to the trending markets and their dividend payouts offer safety in times of market turbulence.

Given this, Vanguard Value ETF (VTV - Free Report), iShares Russell 1000 Value ETF (IWD - Free Report), Vanguard Mega Cap Value ETF MGV and Schwab U.S. Large-Cap Value ETF (SCHV - Free Report), having a Zacks ETF Rank #1 could be excellent picks.

Quality Bet

Quality stocks are rich in value characteristics with a healthy balance sheet, high return on capital, low volatility, elevated margins, and a track of stable or rising sales and earnings growth. These products thus reduce volatility when compared to plain vanilla funds and hold up rather well during market swings. Further, academic research shows that high-quality companies consistently deliver superior risk-adjusted returns than the broader market over the long term. Among the most popular quality ETFs are iShares Edge MSCI USA Quality Factor ETF (QUAL - Free Report) and Invesco S&P 500 Quality ETF (SPHQ - Free Report).

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