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Buy in May and Go Away, Without Worrying

BOSTON ( TheStreet) -- "Sell in May and go away" is an old-school investment aphorism that just won't die.

It means the best strategy for avoiding the stock market's summer doldrums is to park your portfolio in Treasury bills or cash until October.

Leonard Rosenthal, a finance professor at Bentley University in Waltham, Mass., said there's a renowned academic study covering the 80 years through 2006 that backs up the idea of a seasonal market cycle. It concludes that two-thirds of gains in an average year come between November and April.

But given the paltry returns of interest-only investments today, not to mention the stock market's current volatility, what is in essence a recommendation for a market-timing play should probably have been retired along with white-shoe bankers. For one thing, it would have caused its followers to miss the huge rebound in the summer of 2009. Then there are tax issues to consider when selling securities.

And who needs to take such dire action when there are so many other sure-fire strategies to keep a portfolio on boil from a beach chair? A bulletproof portfolio for the next six months should include a mix of large-cap stocks with global exposure, and a couple conservative mutual funds that limit losses in a downturn but also have the potential to post gains.

But, first, on the sell side, it probably is a good time to sell in May if you have a stake in the small-cap sector, advises Bank of America's (BAC - Get Report) Merrill Lynch. Those shares climbed over 10% in the first four months of the year. The brokerage unit said in a May 3 research report that, historically, "small-caps tend to fall by 0.5% over the subsequent three months (after an early-year run-up) and by 1.2% when we reach August."

At this time last year, Merrill Lynch said, the Russell 2000 had risen 15% in the same period and subsequently dropped 16% through August. The Federal Reserve's bond-buying program, announced in November but widely expected for two months, boosted small-caps, the brokerage said.

So take those gains and build a portfolio made up of a mix of a few of the following four stocks and two mutual funds. They should keep your summer from being a bummer while you're "away":

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