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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

#111

Post by baobabKoodaa »

dasil003 wrote: post #61
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…

Passive or active is not binary. Berkshire Hathaway’s strategy is passive by the WSB generations standards.

Please stop trying to re-define words which already have an established definition. "Passive" and "active" investing are well defined concepts, and Berkshire Hathaway falls squarely in the "active" category.

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

#112

Post by hehaheha »

xyzelement wrote: post #95
hehaheha wrote: post #84

Earlier quoted context omitted.

That’s not quite right about passive and active though. It almost always resets every quarter (or other liquidity events). Passive introduced delayed price discovery and as a result greater volatility around earnings (or liquidity events). But over medium to long term passive vs active should not matter.

Why isn't it "quite right?" I spelled out 3 scenarios that can play out and obviously will given the structure and incentives. Where do you disagree?

Because passive does not necessarily mean index. You can be passive and concentrated (see ARKK). And more importantly real world indices are moving target to begin with. They’re just very rough approximation of market basket. SPX is not representative of market as it relates to mpt at all. In fact that’s likely one of the biggest myths in modern finance.

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

#113

Post by baobabKoodaa »

4TunateSon wrote: post #19
andi999 wrote: post #5

Earlier quoted context omitted.

So Jane Street and James Simons do not exist?

Jane Street and RenTech are very different institutions compared to something like Vanguard or Fidelity. They aren't accessable to retail investors/traders, they have different goals, and methods.

Nope, you're moving the goalposts now. The grandparent claimed that active investing is not a good choice for _anybody_. So a single example like RenTech is sufficient to disprove that claim.

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

#114

Post by nly »

emerongi wrote: post #74
zitterbewegung wrote: post #17

Earlier quoted context omitted.

Dollar cost averaging[1] which is basically you buy any security every x amount of days. This is usually how a 401k is setup where you buy a mutual fund every time you get a paycheck. [1] https://en.wikipedia.org/wiki/Dollar_cost_averaging

Worthwhile to read the full article, as well as the sources, and decide what is best for you. > The financial costs and benefits of DCA have also been examined in many studies using real market data, typically revealing that the strategy does not deliver on its promises and is not an ideal investment strategy. > Recent research has highlighted the behavioural economic aspects of DCA, which allows investors to make a…

It's not a 'strategy' really. Most regular Joe investors earn a salary every month, and keep spare money invested in the market. DCA isn't a choice in this case, it's the natural result.

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

#115

Post by yumraj »

thrav wrote: post #51
CarelessExpert wrote: post #35

Earlier quoted context omitted.

> there are pockets of young people partaking in sophisticated strategies, and doing quite well. If we could I'd make a 20 year wager that every one of those people will fail to beat the market in the long run. It's very easy to make money on "sophisticated strategies" during an historic 10 year bull run.

They’re making money up and down. For example, SPY is likely done climbing for a while. Maybe it will squeeze up to ~4160, but it’s either going to be flat or aggressively down in the coming days. Thursday/Friday was a very clear exit day. If it squeezes north and over extends further, it’s a very clear short. If it sits flat for a week until OPEX, it’ll be a clear buy for another leg up, then you reevaluate again. T…

> It’s like turning a freighter, versus turning a speed boat.

That is an apt analogy, which is why I believe Rentech’s Medallion fund is kept small and has better returns than other larger funds.

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

#116

Post by baobabKoodaa »

djoldman wrote: post #11
andi999 wrote: post #5

Earlier quoted context omitted.

So Jane Street and James Simons do not exist?

I think it's pretty obvious that the parent is talking about the average investor.

> I think it's pretty obvious that the parent is talking about the average investor.

Really? Because this is what the (grand)parent said:

"Whether you're an individual trader or a billionaire hedge fund manager, active strategies lose out to passive ones in the long run."

Clearly grandparent was not talking solely about the average investor.

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

#117

Post by baobabKoodaa »

nceqs3 wrote: post #20
andi999 wrote: post #5

Earlier quoted context omitted.

So Jane Street and James Simons do not exist?

1) Jane Street isn't that successful. 2) RenTech spends billions every year on compute, data and hiring the smartest people in the world. The average person could never compete with RenTech.

> The average person could never compete with RenTech.

Grandparent claimed that active investing is not good for _anybody_. A single example (like RenTech) is sufficient to disprove that claim. If you want to move the goalposts to "the average person", then it'll be an entirely different discussion.

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

#118

Post by CynicusRex »

gruez wrote: post #108
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…

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

Got a sprain? Call a doctor. Leaking pipe? Call a plumber. Doesn't seem nebulous at all. Conversely, speculation and greed ruining the world? Call on the populace to bail them out. Speculation doesn't build or fix physical stuff.

>You mean some sort of planned economy? Those have not worked well historically.

Because historically it has been done on inferior computers. Whereas now we have the computing power to calculate the economy n-times over. Dr. Paul Cockshott on Cybersocialism: https://www.youtube.com/watch?v=LtlZys7QOO4. That being said, I'm sceptical as well; the video leaves many things unanswered which he expands on in his books that I have yet to read. However, I welcome any ideas on how to detach humans from having to deal with money, so we can collectively pursue more lofty goals, beyond profit.

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

#119

Post by throw0101a »

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…

> The Medallion fund is a whole other kettle of fish.

It should be noted that while markets may be mostly efficient, I do not think anyone is claiming they are completely efficient.

If there are price discrepancies/anomalies, they could be exploited, at least some of the time. It could be that Medallion can find some and exploit them, say, 55% of the time. But over a large volume of transactions.

Casinos make huge profits by exploit small house edges in volume:

* https://wizardofodds.com/gambling/house-edge/

There's a reason why Medallion has been closed for years: the (possible) market inefficiency exploits they're using may not scale.

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

#120

Post by milesvp »

zitterbewegung wrote: post #17
nicolas_t wrote: post #9

Earlier quoted context omitted.

As someone who is doing buy and hold and not doing any day trading, how can I protect myself from the wild swings of the market caused by active traders gambling?

Dollar cost averaging[1] which is basically you buy any security every x amount of days. This is usually how a 401k is setup where you buy a mutual fund every time you get a paycheck. [1] https://en.wikipedia.org/wiki/Dollar_cost_averaging

You may have missed something important, which is you should have some ideal portfolio balance in mind when purchasing. This forces you to “buy low and sell high” in that you buy whatever you need to to bring your percentages in line with you’re ideal. This is the only strategy I’ve seen that provably beats the market (and it’s been a while since I saw the paper talking about this, may be that it only beats the market in terms of total risk adjusted returns, and not total dollars returned).

Edit: also it’s important that you’re asset portfolio has asset classes that tend to be out of phase, like stocks vs bonds.

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