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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

#81

Post by freetime2 »

baq wrote: post #63
yoz-y wrote: post #33

Earlier quoted context omitted.

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.…

> Then consider just how much shares passive funds move all the time due to continuous rebalancing they do due to their self-imposed mandate.

One of the big selling points of passive, market weighted ETFs is their low turnover and high tax efficiency. Vanguard’s S&P 500 ETF (VOO) has an annual turnover of 4%, for example. That’s nothing compared to the turnover in an actively traded portfolio.

Sure they do a lot of trading volume to account for inflows and outflows from the ETF. But one of the very nice properties of market weighting is that there is hardly any rebalancing needed as individual assets drift in price.

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

#82

Post by airstrike »

madrox wrote: post #45
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…

If there’s anything different about GenZ, it’s that they’re crowdsourcing their plays, making them behave more like a distributed mutual fund than a bunch of gamblers. Time will tell if that performs better.

Or they're just getting played by finance "influencers" who buy into trades first and make most of the profits

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

#83

Post by thrav »

naturalauction wrote: post #69
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…

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…

My point is that they can, to a degree. The bigger challenge for them is scaling in and out of the size of positions they need to be in to be profitable.

If you’re playing with thousands, you’re playing a completely different game than someone playing with billions. You don’t have to strategize about how to exit. You just exit.

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

#84

Post by hehaheha »

xyzelement wrote: post #60

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 av…

That’s not quite right about passive and active though. It almost always resets every quarter (or other liquidity events). Passive introduced delayed price discovery and as a result greater volatility around earnings (or liquidity events). But over medium to long term passive vs active should not matter.

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

#85

Post by the_local_host »

xyzelement wrote: post #60

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 av…

"Imagine 100% is active" That said, I as a buyer-and-holder, I welcome the hordes of active traders willing to expend time, effort, and money to discover the price that I too will be able to trade at.

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

#86

Post by thrav »

naturalauction wrote: post #69
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…

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…

My point is that they can, to a degree. The bigger challenge for them is scaling in and out of the size of positions they need to be in to be profitable.

If you’re playing with thousands, you’re playing a completely different game than someone playing with billions. You don’t have to strategize about how to exit. You just exit.

Many hedge funds outsource the execution of their trades to HFT, which scales in and out over days.

Google Archegos if you want to see what happens when you liquidate billion dollar positions in a hurry.

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

#87

Post by kreeben »

xyzelement wrote: post #60

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 av…

>> think of the recent GME short squeeze but in reverse

Reverse how? There are so many axis I don't know which to use as the basis of my flip. If you care to, please explain a bit more in detail.

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

#88

Post by Trasmatta »

thrav wrote: post #78
Trasmatta wrote: post #68

Earlier quoted context omitted.

> 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.

Did those same people see the subsequent bull run, that occurred much faster than most were predicting?

There's a lot of people who think they're smart enough to time the market, but have just been lucky. In the long run, that catches up to most of them, which is one of the reasons passive investing wins out in the end, on average

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

#89

Post by mancerayder »

CarelessExpert wrote: post #75
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…

> 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.

Why would I have the same strategy during a bear market? How do index funds fare during a bear market? Might the 70 pct cash I have be used for non equity investments, like real estate?

There's something strange about the framing of the passive index fund scenario. Over 20-30 years? I'm not interested in beating that benchmark if I'm interested in increasing my net wealth in the next few years. Downvote away, this is my experience and feeling on the topic, not financial advice to others.

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

#90

Post by bkberry352 »

ericjang wrote: post #15
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…

"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…

I don’t think anyone would argue with the statement “if you possess an information advantage then you’re better off actively trading”. It’s mostly in the situation where you don’t have an information advantage that passive investing outperforms (on average). The fun part is that everyone _thinks_ they have an information advantage, but fewer really do.
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