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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

#321

Post by omgwtfbyobbq »

paulgb wrote: post #174
omgwtfbyobbq wrote: post #52

Earlier quoted context omitted.

Why do you think prices are completely detached from a company's financial viability and business profitability? If I invested in a fund that's indexed to the S&P 500, and a company doesn't do well and drops out of the index, then the fund will sell that company and buy whatever replaces them. Ideally, sure, the fund could have known ahead of time and sold before the company dropped out of the S&P 500, but that's try…

> If I invested in a fund that's indexed to the S&P 500, and a company doesn't do well and drops out of the index, then the fund will sell that company and buy whatever replaces them. The company drops out of the index on poor performance because its market cap goes below some threshold, because active investors short it or sell it when its poor performance makes it overpriced. If every investor is passive, there is…

> If every investor is passive, there is no mechanism for the price to reflect the company's underlying finances.

Sure, but that's a big if. We're a long way from 100% anything.

Also, a company can drop out of an index even when it's doing well just because investors are running a short campaign against it, so I would caution against the assumption that all market performance is because of poor company performance.

In general, the trend has been for most active investors to underperform the market, in part because they charge higher fees, but also because successful active investing is very hard to do consistently. People moving away from those active investors and to index funds won't hurt the market because they generally don't do as well as the market.

Now, if people move away from effective active investors, then that could lead to the problems mentioned, but I've never heard of people moving away from effective active investment.

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

#322

Post by freetime2 »

MR4D wrote: post #319
freetime2 wrote: post #309

Earlier quoted context omitted.

> 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…

In order to avoid wash-sale rules, you’d want them to be similar, but slightly different; such as VOO and VTI.

According to Investopedia at least [1], VOO and SPY are not considered substantially identical by the IRS:

> For example, if an investor sells the SPDR S&P 500 ETF (SPY) at a loss, they can immediately turn around and purchase the Vanguard S&P 500 ETF.

> The rationale is that the two S&P 500 ETFs have different fund managers, different expense ratios, may replicate the underlying index using a different methodology, and may have different levels of liquidity in the market. Presently, the IRS does not deem this type of transaction as involving substantially identical securities and so it is allowed, although this may be subject to change in the future as the practice becomes more widespread.

[1] https://www.investopedia.com/terms/s/substantiallyidenticals...

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

#323

Post by Thorrez »

freetime2 wrote: post #322
MR4D wrote: post #319

Earlier quoted context omitted.

In order to avoid wash-sale rules, you’d want them to be similar, but slightly different; such as VOO and VTI.

According to Investopedia at least [1], VOO and SPY are not considered substantially identical by the IRS: > For example, if an investor sells the SPDR S&P 500 ETF (SPY) at a loss, they can immediately turn around and purchase the Vanguard S&P 500 ETF. > The rationale is that the two S&P 500 ETFs have different fund managers, different expense ratios, may replicate the underlying index using a different methodology,…

I wonder where that page gets its information. Its own quote links to an IRS document that doesn't seem to mention this case. Other places online recommend against it.

>There has been no IRS ruling on whether ETFs from two different companies that track the same index are considered substantially identical.

https://www.fidelity.com/learning-center/investment-products...

>Investment advisors and tax planners recommend against selling an index mutual fund from one fund company and buying another index fund tracking the same stock index from another mutual fund company.

https://finance.zacks.com/substantially-identical-mutual-fun...

>And while arguably swapping from index funds like SPY to IVV are almost certainly a wash sale abuse (or at least, a transaction that should trigger the wash sale rules)

https://www.kitces.com/blog/the-wash-sale-problem-when-tax-l...

If you look at Wealthfront's own documentation, when they do tax loss harvesting with ETFs, they find ETFs that track similar but not identical indexes:

https://research.wealthfront.com/whitepapers/tax-loss-harves...

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

#324

Post by mancerayder »

djohnston wrote: post #282
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…

I wouldnt call you an imbecile, but your portfolio is 70% cash? Cash is trash, as they say.

Dry powder for the next thing. Property?

Index funds are high risk! What if there's a big dip and you find the perfect house?

Bond rates are low and a bit uncertain at the moment. What's your 'cash replacement'?

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

#325

Post by freetime2 »

Thorrez wrote: post #323
freetime2 wrote: post #322

Earlier quoted context omitted.

According to Investopedia at least [1], VOO and SPY are not considered substantially identical by the IRS: > For example, if an investor sells the SPDR S&P 500 ETF (SPY) at a loss, they can immediately turn around and purchase the Vanguard S&P 500 ETF. > The rationale is that the two S&P 500 ETFs have different fund managers, different expense ratios, may replicate the underlying index using a different methodology,…

I wonder where that page gets its information. Its own quote links to an IRS document that doesn't seem to mention this case. Other places online recommend against it. >There has been no IRS ruling on whether ETFs from two different companies that track the same index are considered substantially identical. https://www.fidelity.com/learning-center/investment-products... >Investment advisors and tax planners recommend…

Yup it sounds like a bit of a gray area for now. I think for most people it probably comes down to the way your broker reports the transaction on your 1099. I.e. if my broker reports it to the IRS as a "covered" loss, that's probably what I would use when filing my taxes.

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

#326

Post by thrav »

CarelessExpert wrote: post #35
thrav wrote: post #29

Earlier quoted context omitted.

While you’re right about the majority, there are pockets of young people partaking in sophisticated strategies, and doing quite well. The people in the discord server that I belong to are all using stops to max their downside and get out quick if their instinct proves wrong. After several months on paternity leave, it became clear that greatest barriers to active trading are money and time, like most things. If you’r…

> 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.

Here comes that squeeze up around 4160. I would expect things to turn south today or tomorrow, but I'm only half watching the markets now that I'm working again.

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

#327

Post by JessicaBosworth »

throw0101a wrote: post #119
atombender wrote: post #77

Earlier quoted context omitted.

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 pr…

The tax burden always puts pressure on any man in the street, and even more so on every businessman, and now a new financial year is already underway, and business processes remain at the level of last year, therefore, it is necessary to further intensify the working moments for successful work. Of course, now the purchasing power has slightly decreased, and in general they are buying fewer goods, but all the same, the turnover will soon increase and everything should return to normal, and then, finally, the time for entertainment and online casino games https://jennycasino.com/ where you can play with great interest.
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