Wall Street is littered with market lore, and this is the time of year when the pros roll out the “sell in May and go away” adage. This old saying actually holds water, it turns out. Historically, U.S. stocks tend to underperform from May through October, while the market chalks up the best gains from November through April.

For history buffs, the origins of this saying stem from the British, who said, “sell in May and go away, come back on St. Leger day,” which refers to their horse racing season.

“Established in 1776, the St. Leger Stakes is the last flat thoroughbred horse race of the year and the final leg of the English Triple Crown. Apparently, once the British horse racing season concludes, everyone can get back to the business of buying stocks,” says Christopher Mistal, director of research at Stock Trader’s Almanac, a Nyack, New York-based stock advisory and research company.

The historical performance of this seasonal stock market phenomenon is notable. Since 1950, the Dow Jones industrial average gained an average of 7.5 percent per year during the November-through-April period, versus a 0.3 percent increase May through October, according to Ron Weiner, founder and CEO of RDM Financial Group, an investment advisory firm based in Westport, Connecticut, and Boca Raton, Florida.

The Stock Trader’s Almanac calls this seasonal tendency the “best six months and the worst six months.”

While no one really knows why this occurs, there are theories. “The pattern is most likely the result of summer vacation behavior, where traders and investors prefer the golf course, beach or poolside to the trading floor or computer screen, which contributes to the summer doldrums,” Mistal says.

Supporting positive stock returns from November through April are “institutions’ efforts to beef up their numbers to help drive the market higher in the fourth quarter, along with holiday shopping and an influx of year-end bonus money,” Mistal explains. “Then, there’s the New Year, which tends to bring a positive, new-leaf mentality to forecasts and predictions and the anticipation of strong fourth- and first-quarter earnings.”

Capitalizing on the trend. The numbers show that the health care and consumer staples sectors — defensive areas of the stock market — actually perform better from May through October. For more active investors, there is an exchange-traded fund rotation strategy that has outperformed the Standard & Poor’s 500 index by 3 percentage points per year since 1990, according to Sam Stovall, managing director of U.S. equity strategy at S&P Capital IQ’s Global Markets Intelligence group.

Here’s how the ETF sector rotation strategy works with a hypothetical $2,000 portfolio, according to Stovall. On May 1, an investor could put $1,000 into the Consumer Staples Select Sector SPDR ETF (symbol: XLP), and the other $1,000 into Health Care Select Sector SPDR ETF (XLV). “Hold it until April 30, and then take your money, split it in half and invest the entire account into SPDR S&P 500 ETF (SPY). Every six months, do this routine,” Stovall says.

According to Stovall’s data starting April 30, 1990, “while the S&P 500 has gained an average of 1.6 percent in that May-October period, a portfolio with 50 percent consumer staples and 50 percent health care has gained 4.9 percent,” he explains. “It’s so simple, and all you need are those three ETFs, and you just make the change every six months.”

Historically, bond funds have also enjoyed gains during this period. “Traditionally, defensive sectors and Treasury bonds have performed well during the worst six months,” Mistal says. He points to the iShares Core US Aggregate Bond ETF (AGG), iShares 7-10 Year Treasury Bond ETF (IEF) and iShares 20+ Year Treasury Bond ETF (TLT) as funds to consider.

He adds: “If the market were to come unraveled like it did during the worst six months of 2011, bear/short ETFs like AdvisorShares Ranger Equity Bear (HDGE) or ProShares UltraShort S&P 500 (SDS) will perform well,” Mistal says. (Note that these types of ETFs are generally geared to more aggressive and active investors.)

Move to the sidelines? For most long-term investors, the buy-and-hold approach is still the recommended strategy, as proper diversification in your portfolio can help you weather the market’s ups and downs. But more active investors looking to capitalize on the seasonal tendency may consider moving part of their portfolios to cash. “If an investor has an engineer-like mentality, focused strictly on the numbers and doesn’t get frazzled, maybe this is the year for part of the portfolio to go to the sidelines,” Weiner says. Instead of shifting completely out of stocks, as the old saying dictates, “a more successful strategy is partially in and partially out,” he adds.

Experts say you shouldn’t overlook the importance of history when it comes to investing in the stock market. “Whether or not one believes in seasonality, I would suggest not ignoring it,” Mistal says. “Long-term, buy-and-holders will face higher odds of flat to negative returns sometime during the worst six months.”

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Should You Sell Stocks in May and Go Away? originally appeared on usnews.com