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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

#71

Post by Ekaros »

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.

I wouldn't go that far, there is always outliers. But I would also bet that on average they will do worse than the market.

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

#72

Post by hehaheha »

It’s not resurgence of active trading. It’s a new brand of highly levered trading. We’ve never seen anything like it before. This was highlighted at institution level with Softbank last year and recently with Bill Hwang and Archegos debacle. And you see retail trading weekly options in high volume. Is it gambling? When was investment not gambling? It was always “informed” gambling with positive expected avg return.

What’s the economic impact of this behavior though? I want to say it’s generally negative since it’s bound to grossly disrupt proper price discovery but was that even the case before this period of excess leverage? I doubt it.

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

#73

Post by Ozzie_osman »

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.

> Maybe a16z doesn't like it

As investors in Robinhood I would imagine they love active investing.

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

#74

Post by emerongi »

zitterbewegung wrote: post #17
nicolas_t wrote: post #9

Earlier quoted context omitted.

As someone who is doing buy and hold and not doing any day trading, how can I protect myself from the wild swings of the market caused by active traders gambling?

Dollar cost averaging[1] which is basically you buy any security every x amount of days. This is usually how a 401k is setup where you buy a mutual fund every time you get a paycheck. [1] https://en.wikipedia.org/wiki/Dollar_cost_averaging

Worthwhile to read the full article, as well as the sources, and decide what is best for you.

> The financial costs and benefits of DCA have also been examined in many studies using real market data, typically revealing that the strategy does not deliver on its promises and is not an ideal investment strategy.

> Recent research has highlighted the behavioural economic aspects of DCA, which allows investors to make a trade-off between the regret caused by not making the most of a rising market and that caused by investing into a falling market, which are known to be asymmetric.

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

#75

Post by CarelessExpert »

mancerayder wrote: post #66
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…

> Someone explain to me why I'm an imbecile and why I should have been invested in Vanguard index funds

Simple: you got lucky in a bull market.

Let's revisit how you're doing in the next recession or after a couple bad bets.

If you want a deeper answer you'll have to do your own digging, as it's a big topic. But it's worth starting with the efficient markets hypothesis and reading some of the work of Jack Bogle.

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

#76

Post by baq »

nicolas_t wrote: post #9
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…

As someone who is doing buy and hold and not doing any day trading, how can I protect myself from the wild swings of the market caused by active traders gambling?

you have to be aware of the macro environment: reflation, deflation, stagflation and growth all have different assets being better than others. currently we have reflation, so growth companies melt up, finance earns more due to rising rates, etc. once deflation comes you should be mostly positioned out of stocks, so you don't get blown up. 20% drawdown will get eventually compensated, but if you can avoid it, you've just added 20% to your base of compounding interest.

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

#77

Post by atombender »

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…

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 that nobody else is replicating their performance should tell you just how difficult it is.

In 2019, 71% of actively managed funds lagged behind their benchmark according to the S&P. In 2020, it was "just" 57% [2]. Meanwhile, 70% of active funds have been liquidated the last 20 years. There are of course years where actively managed funds are the winners, but over time, actively managed funds tend toward the mean, either lagging or matching the S&P 500.

[1] https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3197185

[2] https://www.spglobal.com/spdji/en/documents/spiva/spiva-us-y...

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

#78

Post by thrav »

Trasmatta wrote: post #68
thrav wrote: post #51

Earlier quoted context omitted.

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…

No one saw it coming in January. Everyone saw it coming the week that it was starting, which is my point. It’s really easy to tell when the big players start taking risk off.

These people are also tracking senators and congress people’s positional moves, as additional macro indicators.

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

#79

Post by Trasmatta »

zitterbewegung wrote: post #17
nicolas_t wrote: post #9

Earlier quoted context omitted.

As someone who is doing buy and hold and not doing any day trading, how can I protect myself from the wild swings of the market caused by active traders gambling?

Dollar cost averaging[1] which is basically you buy any security every x amount of days. This is usually how a 401k is setup where you buy a mutual fund every time you get a paycheck. [1] https://en.wikipedia.org/wiki/Dollar_cost_averaging

401k contributions aren't really DCA. It would fall more accurately under DCA if you were given the entire year's 401k contribution at once, and still chose to invest it periodically, rather than all at once.

Or if you got a $10k bonus, and invested it over 6 months or something.

FWIW, lump sum usually beats DCA in the long run.

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

#80

Post by dionidium »

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…

What's remarkable to me is that I know you think you're saying something useful and reasonable, but to me you sound indistinguishable from an astrologist. Practically every word sounds more pseudoscientific than the one before it.
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