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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

#301

Post by baq »

nly wrote: post #123
baq wrote: post #38

Earlier quoted context omitted.

except it isn't: if enough gamblers stick to one ticker, they can break the market. options aren't roulette and stocks aren't blackjack. casinos don't have this failure mode. gamestop was the example of what happens in the limit - only the DTCC prevented a global financial crisis as a circuit breaker of last resort.

Sports bookmakers will ban your ass if you look to be any kind of sharp, or engage in arbitrage (exploiting their slow pricing). Casinos wont let you put a billion $$$ on red or black just because they have a 1/37 edge on the roulette wheel. That variance is to high. There are failure modes

Fair points. I had options in mind, casinos don’t have derivative bets afaik...

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

#302

Post by kwere »

dasil003 wrote: post #159
baobabKoodaa wrote: post #111

Earlier quoted context omitted.

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.

Fair criticism of my phrasing, but at the same time you can't put day traders, HFT, or most hedge fund strategies in the same bucket as Berkshire Hathaway. There is a distinct difference in time horizons behind the strategies.

active = alpha; passive = beta;

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

#303

Post by LatteLazy »

baq wrote: post #296
LatteLazy wrote: post #274

Earlier quoted context omitted.

People broke the market on GME, but then they got rinsed for it. Hardly a win...

They almost did. Market owners decided they won’t have it that way, as they should or there would be many more losers.

The market owners weren't involved. The clearing company have been accused of "helping" hedge funds. But that's a conspiracy theory really...

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

#304

Post by mancerayder »

atombender wrote: post #106
mancerayder wrote: post #66

Earlier quoted context omitted.

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…

Haha, random. Good one. The tech bull run in the last decade has been random? There's no getting through, here.

Stop comparing traders and active funds in your study citations. That's not the benchmark. I'm not a fund (which has its own issues as it has to manage 100s of millions which is different than an account like one of ours), and I'm not a day trader/trader. Buying and holding stocks is hardly a zero sum game. You're confused with day trading and options trading which DOES have two sides of a bet. There's something about humanity that some folks here fail to understand when their noses are in the numbers. Are you trying to sell to me the idea that buying AAPL in the early 2000s was a random pick? I'm done here, all that's happening is I lose points as punishment for questioning orthodoxy.

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

#305

Post by atombender »

mancerayder wrote: post #304
atombender wrote: post #106

Earlier quoted context omitted.

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…

Haha, random. Good one. The tech bull run in the last decade has been random? There's no getting through, here. Stop comparing traders and active funds in your study citations. That's not the benchmark. I'm not a fund (which has its own issues as it has to manage 100s of millions which is different than an account like one of ours), and I'm not a day trader/trader. Buying and holding stocks is hardly a zero sum game.…

Buying AAPL in the early 2000s seems obvious now, but it was not obvious then. Prior to the iPhone, in the midst of a market dominated by the likes of Microsoft, a lot of people had very low expectations for Apple. The chances of AAPL beating companies like XOM or GE were not predictable at the time, and you can say the same today about any stock. At the time, you could of course argue for why AAPL would have enormous future growth, but it wouldn't be a prediction, but a bet.

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

#306

Post by freetime2 »

akor wrote: post #270
hogFeast wrote: post #164

Earlier quoted context omitted.

Correct. What they are selling you is an asset allocation, this turns on it's head all the innovation since the early 90s...and the performance you likely get will be indistinguishable from what most people could achieve on their own. One of the big advantages that savers have today are open platforms (there was a time when fund managers ran their own platforms), low dealing costs, low spreads, and ETFs. All that inv…

> ...but what most investors don't know is that WealthFront have zero chance too. So the aim is to equal what they do without their mad fees... Can someone help me understand this comment as to my knowledge WeathFront (WF) fees were the lowest in the industry. For example people talk about Vanguard fees as also being low but they're between 0.25% and 1% [1]. If it makes a difference I'm specifically coming at it from…

Those vanguard fees that you reference aren't really applicable in a comparison with WealthFront. Those are one-time fees when you buy and sell shares, and only apply to a very small number of mutual funds (emerging markets bonds, international real estate, etc). Most vanguard investors don't invest in these funds or pay those fees, and I believe WealthFront doesn't even offer equivalent investments.

On the other hand, you pay that 0.25% fee that WealthFront charges every year, regardless of the performance of your portfolio, and it can pretty quickly amount to thousands of dollars per year.

Most brokerages (Vanguard, Schwab, Robinhood, etc) don't charge any sort of equivalent fee - they are free to open and maintain. And yes it is fairly easy to construct an equivalent portfolio made up of ETFs in a standard brokerage account. You would be losing out on the convenience of WealthFront's automated rebalancing and tax-lost harvesting, though.

Is the convenience of automated investment, rebalancing, and tax-lost harvesting worth paying 0.25% of your total account balance every year? For me, no. But I know some people who are really happy with services like WealthFront and Betterment. Especially for someone just getting started with investing, I would have no issues recommending those services.

Edit: also just noticed you are referring to a retirement account. In that case, WF's tax-loss harvesting feature would not be applicable (since retirement accounts are tax-free), so even less of an incentive to go with WF vs. DIY.

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

#307

Post by mancerayder »

atombender wrote: post #305
mancerayder wrote: post #304

Earlier quoted context omitted.

Haha, random. Good one. The tech bull run in the last decade has been random? There's no getting through, here. Stop comparing traders and active funds in your study citations. That's not the benchmark. I'm not a fund (which has its own issues as it has to manage 100s of millions which is different than an account like one of ours), and I'm not a day trader/trader. Buying and holding stocks is hardly a zero sum game.…

Buying AAPL in the early 2000s seems obvious now , but it was not obvious then . Prior to the iPhone, in the midst of a market dominated by the likes of Microsoft, a lot of people had very low expectations for Apple. The chances of AAPL beating companies like XOM or GE were not predictable at the time, and you can say the same today about any stock. At the time, you could of course argue for why AAPL would have enorm…

Uncertain it was, but it is not the same as the word used before, random.

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

#308

Post by mancerayder »

CarelessExpert wrote: post #101
mancerayder wrote: post #89

Earlier quoted context omitted.

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.

Tell that to the legions of Silicon Valley employees who get paid in publicly traded stock as part of their total comp. Those no good, gambling, risk-taking, market-timing risk takers, them! Didn't they read Bogle?

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

#309

Post by freetime2 »

Thorrez wrote: post #236
hogFeast wrote: post #216

Earlier quoted context omitted.

That is going to depend on what the rules are, and what rates you pay. But is tax-loss harvesting beyond the wit of everyone but WealthFront? No. If you aren't bothered to do it manually then it can't be a big benefit for you...it is always amazes me that companies manage to base their products around utterly pointless/marginal features that no-one uses, like why do you care? It is like people choosing an advisor bec…

>If you aren't bothered to do it manually then it can't be a big benefit for you... Wealthfront has economies of scale to write a program to perform tax loss harvesting automatically. Just because it's not worthwhile for me to do it manually myself doesn't make it not worthwhile for a program to do it automatically. Wealthfront does daily tax loss harvesting on individual stocks. That would be a tremendous amount of…

> Wealthfront does daily tax loss harvesting on individual stocks

Does WealthFront do anything at the individual stock level? My understanding from looking at their landing page [1] is that they basically just allocate your money across a number of publicly traded ETFs:

> How do you choose my investments?

> We choose exchange-traded funds (ETFs) that track an index, such as the S&P 500 or emerging markets. Wealthfront chooses the ETFs with the lowest costs and proper tracking of their index.

Also, you pay the expense ratios of those ETFs in addition to the fees that WealthFront charges:

> What are the costs to invest?

> We’re glad you asked. Our annual advisory fee is 0.25%. On average, you’ll also pay a low 0.06%–0.13% expense ratio. Companies who run investment funds charge this fee, and it comes straight out of that fund’s performance (you aren’t billed directly). Everyone who invests in ETFs pays this fee.

I think would be fairly easy for any ETF investor to approximate WealthFront's tax-loss harvesting strategy in their own brokerage accounts. E.g. simply go in once a quarter and sell any lots of VOO for a loss where possible, and replace with an equivalent like SPY.

[1] https://www.wealthfront.com/investing

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

#310

Post by erik_seaberg »

freetime2 wrote: post #309
Thorrez wrote: post #236

Earlier quoted context omitted.

>If you aren't bothered to do it manually then it can't be a big benefit for you... Wealthfront has economies of scale to write a program to perform tax loss harvesting automatically. Just because it's not worthwhile for me to do it manually myself doesn't make it not worthwhile for a program to do it automatically. Wealthfront does daily tax loss harvesting on individual stocks. That would be a tremendous amount of…

> Wealthfront does daily tax loss harvesting on individual stocks Does WealthFront do anything at the individual stock level? My understanding from looking at their landing page [1] is that they basically just allocate your money across a number of publicly traded ETFs: > How do you choose my investments? > We choose exchange-traded funds (ETFs) that track an index, such as the S&P 500 or emerging markets. Wealthfron…

Above $100K, Wealthfront mixes individual stocks and ETFs.

https://support.wealthfront.com/hc/en-us/articles/211005023-...

(I am a customer.)

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