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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

#61

Post by dasil003 »

baobabKoodaa wrote: post #10
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…

> 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.

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

#63

Post by baq »

yoz-y wrote: post #33
ericjang wrote: post #15

Earlier quoted context omitted.

"statistically proven reality" is an oxymoron - past outperformance of passive funds (statistics) are no guarantee of future returns (reality). Some of the math surrounding the derivation of the weakest forms of EMT also relies on the assumption that everyone has access to the same information, which is patently false in the world we live in. Even retail traders sometimes have an information edge (e.g. working at a b…

Please correct me if I’m wrong. But I assume that earning while holding is based on an assumption that the overall productivity continues to rise, while active trading is more of a zero sum game. Any gains you earn is somebody’s loss. Now, the initial assumption could very well hit a wall.

notice you're contradicting yourself: active traders don't only trade with other active traders, they also trade with those same passive funds that bet on continuous growth in fundamentals of companies and the hope that eventually that growth will be reflected in the stock price.

then consider just how much shares passive funds move all the time due to continuous rebalancing they do due to their self-imposed mandate. (reminder: etfs hold ~$5T worth of assets.)

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

#64

Post by glofish »

yoz-y wrote: post #33
ericjang wrote: post #15

Earlier quoted context omitted.

"statistically proven reality" is an oxymoron - past outperformance of passive funds (statistics) are no guarantee of future returns (reality). Some of the math surrounding the derivation of the weakest forms of EMT also relies on the assumption that everyone has access to the same information, which is patently false in the world we live in. Even retail traders sometimes have an information edge (e.g. working at a b…

Please correct me if I’m wrong. But I assume that earning while holding is based on an assumption that the overall productivity continues to rise, while active trading is more of a zero sum game. Any gains you earn is somebody’s loss. Now, the initial assumption could very well hit a wall.

It makes no sense to say that active trading is zero sum but passive trading isn't.

Either both are or none are.

Holding an asset for N days does not magically flip it from category to the other.

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

#65

Post by CarelessExpert »

xiphias2 wrote: post #53

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.

That's not what "active" or "passive" mean in the investing context.

Active investing refers to active equity or bond selection and investment with the goal of generating excess alpha (i.e. beating the market)

Buying a traditional, managed mutual fund is a form of active investing.

Passive investing involves buying a large, diversified portfolio of equities and bonds such that you hold a percentage of the whole market. This is "passive" because there's no attempt to select specific stocks. The goal is simply to match the market by owning a portfolio that's representative of the market.

Buying an S&P 500 index fund is a form of passive investing.

Both could be done in consultation with a financial advisor.

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

#66

Post by mancerayder »

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…

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 since it'll be taxed as long-term capital gains. That's non retirement brokerage account. Now in my IRA, I buy and sell every few months on dips and peaks. It doesn't have to be perfectly timed, but it's going up. My portfolio is 70% cash and I've been beating the market the past 5 years.

Other winners include tech companies and a space company.

Someone explain to me why I'm an imbecile and why I should have been invested in Vanguard index funds, something I did for decades prior to thjs.

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

#67

Post by ghaff »

pastrami_panda wrote: post #54
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?

Or were we on the verge of a complete global economic meltdown? I admit I transferred a fair bit into very safe investments at the time. As a result I didn't do as well as I could have (but well enough). But it was still a reasonable hedging strategy IMO.

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

#68

Post by Trasmatta »

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…

> Only to those of us with other work to do, did it look like a flash crash out of nowhere.

The market crashed last year because of COVID. Nobody saw that coming.

Everyone has been predicting a major correction or recession every year for at least the past 6 years. Claiming that they predicted what was going to happen last year is pretty blatant confirmation bias.

People predict a recession every year, and then when one finally hits, they say "see, I was right! Ignore all the years where it didn't happen!"

There will be another correction in the future, we don't know when it will hit, and the same pattern will play out again.

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

#69

Post by naturalauction »

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…

Maybe I'm a bit of a skeptic but I've seen this sort of behavior repeat itself over and over again with crypto. Maybe the people in your Discord group are really smarter than almost everyone else, but at the end of the day the vast majority of day traders who think they are using sophisticated strategies are just gambling.

I'm not saying it's impossible to make money - I just doubt you can intuitively get a sense for the "feel" of the market for something as largely traded as SPY. SPY traded 61 million shares yesterday (at $400 per). If the smartest institutional traders with the best tools can't figure out the direction of SPY in the short run with any kind of certainty, I don't see how an "average" person can. There is enough volume in the markets for institutions to turn around a pretty big freighter.

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

#70

Post by dasil003 »

chronic2021 wrote: post #58
maksimum wrote: post #47

Earlier quoted context omitted.

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...

Huh? The first index fund was started 45 years ago, and indexes existed and are tracked far longer than that. Tell me what percentage of hedge funds beat the S&P over the last 50 years?
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