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“Buy and Hold” No More: The Resurgence of Active Trading

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Re: “Buy and Hold” No More: The Resurgence of Active Trading

#101

Post by CarelessExpert »

mancerayder wrote: post #89
CarelessExpert wrote: post #75

Earlier quoted context omitted.

> Someone explain to me why I'm an imbecile and why I should have been invested in Vanguard index funds Simple: you got lucky in a bull market. Let's revisit how you're doing in the next recession or after a couple bad bets. If you want a deeper answer you'll have to do your own digging, as it's a big topic. But it's worth starting with the efficient markets hypothesis and reading some of the work of Jack Bogle.

Why would I have the same strategy during a bear market? How do index funds fare during a bear market? Might the 70 pct cash I have be used for non equity investments, like real estate? There's something strange about the framing of the passive index fund scenario. Over 20-30 years? I'm not interested in beating that benchmark if I'm interested in increasing my net wealth in the next few years. Downvote away, this is…

Well you can keep arguing based on your feelings. I'm arguing based on data. You can choose to ignore that data and try your luck. Just recognize your past performance will not guarantee future returns.

Re: “Buy and Hold” No More: The Resurgence of Active Trading

#102

Post by gruez »

Scoundreller wrote: post #4
lupire wrote: post #3

Article misses the point (perhaps due to their capital investments) that the resurgence in active trading is almost entirely just gambling, but exempted from casino regulation. Also, saying "no more" to refer to a blip fad is a ridiculous healdit.

... and with much lower commissions than betting on horse/footballer/dog races.

Is it? Robinhood allows you to trade for free, but that's not the whole story. Bid-ask spreads add an implicit fee to each transaction. This is small for highly liquid stocks, but buying blue chip stocks directly also isn't exactly exciting. If you want the excitement of gambling you'd need to either use margin (borrowing fees) or options (worse spread).

Re: “Buy and Hold” No More: The Resurgence of Active Trading

#103

Post by baobabKoodaa »

justicezyx wrote: post #25
baobabKoodaa wrote: post #10

Earlier quoted context omitted.

> That isn't conventional wisdom. It's not someone's opinion. It's statistically proven reality. Whether you're an individual trader or a billionaire hedge fund manager, active strategies lose out to passive ones in the long run. This claim is false. Some funds have overperformed year after year with high margins and (relatively) low risk, for decades. For example, Renaissance Technologies' Medallion Fund and Warren…

You are using individual instances to disapprove statistical observation? Ate you seeing the contradiction here? ...

That makes no sense. The claim I'm disputing is of form "X is true for everyone". A single counter-example is sufficient to disprove a claim of this form. Grandparent claimed that everyone would be better off investing passively than actively. So a single counter-example of a genius like Simons is sufficient to disprove that claim.

Re: “Buy and Hold” No More: The Resurgence of Active Trading

#104

Post by baobabKoodaa »

pastrami_panda wrote: post #54
CarelessExpert wrote: post #2

> Conventional wisdom holds that passive trading is the rational investing strategy. That isn't conventional wisdom. It's not someone's opinion. It's statistically proven reality. Whether you're an individual trader or a billionaire hedge fund manager, active strategies lose out to passive ones in the long run. > has catalyzed a lean-in mindset around investing, particularly among Gen Z. And it will burn them, just l…

This is true historically. But at certain times it's a complete no-brainer to enter the market or not. For instance consider post Covid at around March/April 2020. Stocks have dropped 20-30%. It took Moderna 2-3 days to develop a vaccine, is a 20% drop in e.g. Apple justified, or is it simply free money?

> This is true historically.

Nope, this is false. Please look up the historical performance of Renaissance Technologies Medallion Fund.

Re: “Buy and Hold” No More: The Resurgence of Active Trading

#105

Post by xiphias2 »

CarelessExpert wrote: post #65
xiphias2 wrote: post #53

Maybe a16z doesn't like it, but ,,buy and hold'' active investing works quite well. Passive investing means doing what your bank advisor suggests. People are starting to realize that those advisors may not make smarter decisions on where the world is going than the people themselves.

That's not what "active" or "passive" mean in the investing context. Active investing refers to active equity or bond selection and investment with the goal of generating excess alpha (i.e. beating the market) Buying a traditional, managed mutual fund is a form of active investing. Passive investing involves buying a large, diversified portfolio of equities and bonds such that you hold a percentage of the whole marke…

Sure, you are right, but even with that definition somebody could have just bought Apple/Google/Amazon/Facebook/Tesla/ other high growth stocks/Bitcoin 10 years ago, and just waited.

I see more of this kind of active investing happening (people reading Tesla blogs and going to meetups as an example, deconstructing software updates to see how the models are being ported 1-by-1 to the new framework. Financial advirsors generally don't do this in depth due diligents for products (or at least I haven't met any).

As an example I read through a part of the Bitcoin source code to see how well it's written before investing in it, and I haven't seen any financial advisor who even looked at its github repo, and they already have opinion on it.

Re: “Buy and Hold” No More: The Resurgence of Active Trading

#106

Post by atombender »

mancerayder wrote: post #66
CarelessExpert wrote: post #2

> Conventional wisdom holds that passive trading is the rational investing strategy. That isn't conventional wisdom. It's not someone's opinion. It's statistically proven reality. Whether you're an individual trader or a billionaire hedge fund manager, active strategies lose out to passive ones in the long run. > has catalyzed a lean-in mindset around investing, particularly among Gen Z. And it will burn them, just l…

I'm running counter-current here. I bought a vaccine maker last year, putting a quarter of my stock portfolio in it over time (several buys on dips). The vaccine maker was then approved, and is one of the biggest ones rolling out globally. This wasn't a one off, as I continued to follow the news and bought more blocks over several months. My portfolio is up a significant amount. On one year blocks, I'll start to sell…

Stock picking basically has random outcomes. Sure, you may have a few lucky wins in the short term. But over time, your losing bets tend to outnumber your winning bets, and your returns experience what's called reversion to the mean.

This phenomenon has been shown repeatedly in studies of trading behaviour among individual investors (e.g. [1] and [2]), who have been found to collectively destroy wealth for all other investors. Only an absolutely minuscule proportion of traders actually beat the market.

As with any casino, there are winners and losers. But usually the house wins.

[1] https://faculty.haas.berkeley.edu/odean/papers%20current%20v...

[2] https://www.sciencedirect.com/science/article/abs/pii/S13864...

Re: “Buy and Hold” No More: The Resurgence of Active Trading

#107

Post by baobabKoodaa »

atombender wrote: post #77
baobabKoodaa wrote: post #10

Earlier quoted context omitted.

> That isn't conventional wisdom. It's not someone's opinion. It's statistically proven reality. Whether you're an individual trader or a billionaire hedge fund manager, active strategies lose out to passive ones in the long run. This claim is false. Some funds have overperformed year after year with high margins and (relatively) low risk, for decades. For example, Renaissance Technologies' Medallion Fund and Warren…

Warren Buffett's investing performance can be explained by an intuitive understanding of known market factors (the French-Fama five-factor asset pricing model, etc.) [1]. The Medallion fund is a whole other kettle of fish. Medallion uses extremely sophisticated models which took Jim Simons and his team of math wizards more than a decade to figure out, using vast amounts of historical data and computation. The fact th…

> In 2019, 71% of actively managed funds lagged behind their benchmark according to the S&P.

Yes, you have a market where participants trade against each other, and you discover that the average participant in the market does not "beat the market". That should be obvious. The question in dispute is whether _anyone_ can beat the market, and there's a mountain of evidence that certain people/funds beat the market year after year.

Re: “Buy and Hold” No More: The Resurgence of Active Trading

#108

Post by gruez »

CynicusRex wrote: post #44

Thinking out loud, but to me, any economic system is flawed if it rewards bankers, hedge funds, venture capitalists, and speculation more than carpenters, plumbers, or any other profession that requires actual real world skills. My gut tells me that finance should be automated by computers without a profit motive because greed rots the soul and our environment.

>Thinking out loud, but to me, any economic system is flawed if it rewards bankers, hedge funds, venture capitalists, and speculation more than carpenters, plumbers, or any other profession that requires actual real world skills

"real world skills" is a nebulous concept. What counts as a "real world skill" and what doesn't?

>My gut tells me that finance should be automated by computers without a profit motive because greed rots the soul and our environment.

You mean some sort of planned economy? Those have not worked well historically. Even if you somehow outsource it to an unbiased computer, who sets the weights? What's the relative value of an apple compared to an banana?

Re: “Buy and Hold” No More: The Resurgence of Active Trading

#109

Post by baobabKoodaa »

djoldman wrote: post #49
baobabKoodaa wrote: post #10

Earlier quoted context omitted.

> That isn't conventional wisdom. It's not someone's opinion. It's statistically proven reality. Whether you're an individual trader or a billionaire hedge fund manager, active strategies lose out to passive ones in the long run. This claim is false. Some funds have overperformed year after year with high margins and (relatively) low risk, for decades. For example, Renaissance Technologies' Medallion Fund and Warren…

1. I think you'll find that funds that consistently beat the market for so many years are not taking investments. 2. Buffet himself says: "In my view, for most people, the best thing to do is to own the S&P 500 index fund"

> 1. I think you'll find that funds that consistently beat the market for so many years are not taking investments.

Yep, I agree.

> 2. Buffet himself says: "In my view, for most people, the best thing to do is to own the S&P 500 index fund"

Again, we are in agreement. I'm not sure what exactly it is that you feel you disagree with me about? Grandparent claimed that _nobody_ can beat the market, and I provided references to evidence that some people can beat the market.

Re: “Buy and Hold” No More: The Resurgence of Active Trading

#110

Post by baobabKoodaa »

scarmig wrote: post #21
baobabKoodaa wrote: post #10

Earlier quoted context omitted.

> That isn't conventional wisdom. It's not someone's opinion. It's statistically proven reality. Whether you're an individual trader or a billionaire hedge fund manager, active strategies lose out to passive ones in the long run. This claim is false. Some funds have overperformed year after year with high margins and (relatively) low risk, for decades. For example, Renaissance Technologies' Medallion Fund and Warren…

2020, Renaissance funds' performance: Closed to outsiders: Medallion, +76% Open to outsiders: RIEF, -23% RIDA, -34%

> 2020, Renaissance funds' performance ...

Since this is in reply to me, let me ask, what's the implication here? The tone of your post sounds like you disagree with me, but it's not clear what exactly you disagree with? Grandparent claimed that no-one can beat the market. I said that Renaissance Medallion Fund beats the market. Then you post a single-year performance of +76%, which is a really good performance for 2020. So... you agree with me?

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