MTTM Podcast Episode 546 – ‘Sell in May & go away’ tested & Credit card traps to avoid

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Is "Sell in May and Go Away" still relevant?

Summary:

We review 50 years of Best Invest market data to test the old investing rule of selling stocks in May and returning in the autumn. The research reveals that summer slumps are almost as likely as summer rallies, making the strategy essentially a coin toss, especially when factoring in dividends and global diversification

Key Insights:

• Dividends are a crucial buffer - While the UK market saw capital losses in 24 out of the last 50 summers, including dividends reduces this frequency to just 17 years.
• Summer rallies are equally likely - Big summer rallies of 10% or more happen almost as frequently as 10% market corrections.
• Global diversification reduces risk - The "sell in May" effect is less pronounced in the MSCI World Index and the US S&P 500 compared to the UK index.
• Gilts outperformed cash - Historically, moving to UK gilts during the summer yielded better returns than moving to cash, though simply staying invested outperformed both over the last decade.

Little-known credit card traps

Summary:

We highlight the confusing rules and hidden traps associated with using credit cards. We explain how to ensure you are covered by Section 75 protection, why leaving a 1p statement balance can trigger interest on your entire debt, and why having a positive credit card balance can lead to your account being frozen.

Key Insights:

• Section 75 applies per item - Protection only applies if the individual item costs between £100 and £30,000, not the total transaction value of multiple cheaper items. You are covered even if you only pay £1 of the item's cost on the card.
• Beware the 1p trap - You must clear your exact statement balance by the due date. Leaving even 1p unpaid can result in interest being charged on the full original balance.
• Residual interest exists - Clearing an old debt might still generate a small "zombie" interest charge the following month due to the days between the statement date and your payment date.
• Balance transfer quirks - You cannot transfer a balance between two credit cards owned by the same parent company (e.g., Halifax and Lloyds).
• Positive balances are flagged - Overpaying your credit card triggers anti-money laundering alerts and can result in your provider freezing the account.

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