41–50 of 54 posts
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Thanks for the feedback. I am not sure if markets are a zero-sum game though? If the sector grows, the whole pie can become bigger, right?
(I think) His point is not that investing is a zero sum activity but that active trading basically is. For me to make money day trading someone needs to loose money. The total "growth of the pie" is a slow process that you capitalize on by buying and holding.
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All of this is of course patently false. Be aware worik and others will try to keep you from joining markets under dubious pretenses like protecting you or caring about your individual financial sanity. Don't listen to anh of them. Don't gamble more than you can afford to lose and you shall be fine.
Stay out of those markets. Here is a thought: What paid for all those shiny towers in Wall Street? Transaction costs from people "...joining markets". Have you heard the joke about the customer's yacht?
I do agree I wouldn't join an automated trading platform without a high level math degree and market understanding though.
People!! Stay away from this!!! I am unsure about the sincerity of the authors of this software but in the general case the purpose of these systems is to bring dumb money into markets. Efficient markets are impossible to make money (risk adjusted positive returns) out of by active investing by definition. Dumb money is not efficient and lets the smart money (people who dedicate their lives to this) make money. Do no…
> If you want to make money work on your skills and get a job. OK, fine. During the pandemic, I picked up and studied trading, and made more money doing that than my actual job (assistant teacher at a university). I know the next step I'm going to take.
S&P gained 16.26% in 2020, roughly 3x average annual gains.
If so, do you/how do you correct for slippage?
People!! Stay away from this!!! I am unsure about the sincerity of the authors of this software but in the general case the purpose of these systems is to bring dumb money into markets. Efficient markets are impossible to make money (risk adjusted positive returns) out of by active investing by definition. Dumb money is not efficient and lets the smart money (people who dedicate their lives to this) make money. Do no…
Is there a mechanism for back-testing strategies? If so, do you/how do you correct for slippage?
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Active investing is not the same as day trading. Most people do not realize that "passive investing" is basically zero sum (albeit harder to calculate because of being stretched over long periods where inflation becomes significant), just like short term trading. Value creation only comes from active investing (long term focused, but active and researched). The kind of active investing that Warren Buffett does is mor…
Passive investing isn't zero sum - it's positive sum. If you could buy a fraction of earnings from every business in the economy (i.e. both businesses that currently exist, and future businesses that are founded in the future), then you get a rate of return that is roughly the growth in GDP. Concentrated portfolios are also positive-sum, and have returns higher than passive investing if you are smart or lucky.
Putting your money in the bank is probably a better contribution to the economy (because banks have trading desks dedicated to more efficiently allocating capital), although it is a terrible personal investment strategy in today's low interest, inflationary environment.
I just want people who demonize active investing to understand that their passive investment strategies contribute less or equal value to society, contrary to popular belief.
How does it compare to Mudrex? [0] Also congratulations on being registered with the FCA and on your recent funding round. Also: > Of course we understand that the HN community has a lot of cryptocurrency sceptics and we respect that. The cryptocurrency market is still full of scams and bad actors. Whether you like it or not though, it is now big enough that it is here to stay. Exactly. Although the cryptocurrency ma…
Thanks! Re Mudrex, they are more of a strategies marketplace nowadays and we want to allow people to build their own 'rules'. We're a bit more like Zapier for trading, they are a bit more of an investments marketplace.
Earlier quoted context omitted.
Passive investing isn't zero sum - it's positive sum. If you could buy a fraction of earnings from every business in the economy (i.e. both businesses that currently exist, and future businesses that are founded in the future), then you get a rate of return that is roughly the growth in GDP. Concentrated portfolios are also positive-sum, and have returns higher than passive investing if you are smart or lucky.
Passive investment has been a good strategy for collecting wealth, but it adds no value to society. Instead of efficiently placing capital to generate new wealth, you are spreading just as much capital to companies that will fail or squander their current valuation as companies that will succeed and should have more capital. It's only more profitable than mutual funds because ETF's have lower fees due to special tax…
You say that passive investment provides no value to society because it provides capital for failed and successful businesses equally. But there you said it: it contributes capital to companies that will succeed. How is this "No value to society"?
>It's only more profitable than mutual funds because ETF's have lower fees due to special tax rules around rebalancing.
No, it's the other way around. It's because ETFs have been found to be more profitable on average than mutual funds, that it was heavily incentivized to invest in them. ETFs are profitable for structural reasons, because it's really hard to beat the market on average.
Earlier quoted context omitted.
Passive investment has been a good strategy for collecting wealth, but it adds no value to society. Instead of efficiently placing capital to generate new wealth, you are spreading just as much capital to companies that will fail or squander their current valuation as companies that will succeed and should have more capital. It's only more profitable than mutual funds because ETF's have lower fees due to special tax…
That makes no sense. Trading desks at the banks are not dedicated to "efficiently allocating capital", they are there to turn a profit no matter what. What's good for a trading desk might not (and often is not) always good for the economy. You say that passive investment provides no value to society because it provides capital for failed and successful businesses equally. But there you said it: it contributes capital…
Because pumping up the market value of a "bad" company contributes negatively (not zero) to the economy. Any benefits that a future innovative company would reap from your capital are canceled out by the same benefits that their wasteful competitors reap for talent and secondary stock offerings (which can be spent on anything, potentially bidding up prices of raw materials, real estate, etc. for the "good" companies).
Is it a perfect 1:1 cancellation? Probably not, but it requires too much data for either of us to calculate it directly. But a fair assumption is that blindly investing in the entire stock market via a passive index, even if you are hugely wealthy, has negligible benefit to GDP, compared to active investing (assuming you are good at it).