“Buy and Hold” No More: The Resurgence of Active Trading • Hacker News Board

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

#51

Post by thrav » Sat, Apr 10, 2021, 8:10 PM UTC

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.

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.

This is what I mean when I say treating it like it’s your job. Go back and look at the big downturn last year. To anyone who was paying attention, it looked like a car crash in slow motion.

Only to those of us with other work to do, did it look like a flash crash out of nowhere. The writing is very clearly on the wall for all of this stuff, because the big players needs days to reposition, and will be moving billions of shares, and you can literally watch them do it.

The reason active funds don’t do as well as the market is because they have to hedge. You’re always paying a premium to minimize losses when you’re hedging, and you can’t exit fast when your position is worth billions.

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

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

#52

Post by omgwtfbyobbq » Sat, Apr 10, 2021, 8:10 PM UTC

genericone wrote: post #30

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…

But passive investing is just that, passive, theres no market information, no price information that influences the shares and prices. How is passive investing sustainable? Doesn't this destroy finance in the long run? Prices being completely detached from a listed company's financial viability and business profitability... thats bad isnt it?

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 trying to time the market, which generally doesn't go well over longer periods of time. It wants to capture gains in the aggregate over long periods of time, not maximize gains. The more individuals and firms try to maximize gains, the more likely they are to get bit over the long term.

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

#53

Post by xiphias2 » Sat, Apr 10, 2021, 8:10 PM UTC

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.

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

#54

Post by pastrami_panda » Sat, Apr 10, 2021, 8:11 PM UTC

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?

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

#55

Post by [deleted] » Sat, Apr 10, 2021, 8:11 PM UTC

MattGaiser wrote: post #46

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.

https://www.investopedia.com/articles/investing/030916/buffe...

[deleted]

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

#56

Post by OutTeam » Sat, Apr 10, 2021, 8:12 PM UTC

thrav wrote: post #29

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…

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…

Is this discord group open for everyone? If yes, would you mind sharing an invite link?

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

#57

Post by WalterBright » Sat, Apr 10, 2021, 8:13 PM UTC

One thing active trading does is subject you to much higher short term tax rates. You'll also lose a bit on the spread every time you trade, even with zero commission brokerage fees.

The longest stock I've held is Boeing (40 years).

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

#58

Post by chronic2021 » Sat, Apr 10, 2021, 8:13 PM UTC

maksimum wrote: post #47

Spooky23 wrote: post #22

Earlier quoted context omitted.

Many folks see Boglehead-ism as some sort of science. It’s not bad advice for a disinterested investor in the US, but not exactly optimal advice either. I’d rather have my AAPL over the last 5 years than VTI+BND.

What would you rather have for the next 5 years? Why?

Citadel hedge fund. 19% annual return. After fees. For 30 years [1].

The most popular index funds (VTI, VGT) only have a 20-year track record, with a paltry 9% and 13% annual return, respectively.

[1] https://www.clearbrookglobal.com/citadel-millennium-d-e-shaw...

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

#59

Post by ubercow13 » Sat, Apr 10, 2021, 8:13 PM UTC

Spooky23 wrote: post #22

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…

Many folks see Boglehead-ism as some sort of science. It’s not bad advice for a disinterested investor in the US, but not exactly optimal advice either. I’d rather have my AAPL over the last 5 years than VTI+BND.

Yes, generally picking a winning stock is a winning strategy.

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

#60

Post by xyzelement » Sat, Apr 10, 2021, 8:13 PM UTC

I am a hedge fund guy who invests his own $$$$ passively so make of this what you will.

There will always be a mix of active and passive.

Fundamentally - passive only works when it follows smart active. Actives do expensive research and trade against each other to arrive at the consensus price. Passives trade at that price for "free." Since both get the same price on average but passives incur no cost, they win on average

This breaks down if passives outnumber actives, or if actives are exceptionally stupid.

Imagine 100% is passive. That means any stock in an index will be bought tomorrow and forever regardless of price. I could exploit that in a ton of ways. For example, do a "squeeze" (think of the recent GME short squeeze but in reverse.)

Or, imagine company X will obviously default but stock keeps going up because passives are obligated to buy. Very easy to exploit by going active!

Finally - think about this. Does your index fund have any GME? That part of your portfolio trades at the price set by Reddit apes. The more of that goes on, the more tempting it is to go "active" on the other side.