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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

#91

Post by xyzelement »

the_local_host wrote: post #85
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.

Thanks! Fixed!

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

#92

Post by hehaheha »

bromquinn wrote: post #37

I kind of hate the idea of encouraging young people to pursue speculation instead of building. Post-IPO investing doesn't create a ton of value for society.

I know what you mean but this notion of buy and holding index was perhaps a mirage. It’s all theoretical and cynical side of me thinks it was “invented” as a way to appropriate pension and retirement funds into Wall Street machination.

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

#93

Post by atombender »

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...

The Vanguard 500 Index Fund (VFINX) has existed since 1976.

Kenneth French (the "French" in the Fama-French asset pricing model) provides market data going back to 1972 [1] and can be used to reconstruct index fund performance.

Citadel doesn't have individual clients, and if you're not a billionaire I don't see how you'd gain access to their hedge fund.

[1] https://mba.tuck.dartmouth.edu/pages/faculty/ken.french/data...

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

#94

Post by croutonwagon »

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…

I see two issues there

1) confirmation bias. Many people have blind faith in the market and while trends are semi-reliable. There are plenty of instances that buck all trends and can take out even the most seasoned day traders accounts if the overrely.

2) a lot of times these are pump and dumb schemes, even by large hedge funds on small companies that are generally overvalued by the time the “opportunity” hits those reading the standard info sources.

So as someone simply managing my own account. A solid strategy is to avoid day trade and only place buys on something you are good to be long on and have faith in. These are big ones like Microsoft or apple or Costco.

I still invest in companies I’m very knowledgeable on but I don’t take risks on nonsense. And worst case I’m long in some stock for a while But I don’t have to monitor it to the minute nor do I have to really coughing up fees for managed funds at a massive scale.

Sure I miss plenty of plays, especially intra-day or intra-week but I also don’t lose anything on those.

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

#95

Post by xyzelement »

hehaheha wrote: post #84
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.

Why isn't it "quite right?" I spelled out 3 scenarios that can play out and obviously will given the structure and incentives. Where do you disagree?

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

#96

Post by xyzelement »

kreeben wrote: post #87
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.

Flip it on all axis, I guess :)

But, sure. Let's say I know that you (index fun) are obligated to buy stock X tomorrow and over all foreseeable future. I am gonna hoard those shares at no risk and sell them to you at a VERY VERY painful price, since you have no room to say "that's too expensive, no thanks"

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

#97

Post by AnimalMuppet »

glofish wrote: post #64
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.

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.

Yes, but a bit of no.

Yes, if the market is overall rising, then active trading should enjoy that overall rise just like buy and hold does.

But then why active trade? Because you think you can do better than passive. That part - the "doing better" part - is zero sum. In fact it's negative sum, because of transaction costs.

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

#98

Post by kreeben »

baq wrote: post #38
lupire wrote: post #3

Article misses the point (perhaps due to their capital investments) that the resurgence in active trading is almost entirely just gambling, but exempted from casino regulation. Also, saying "no more" to refer to a blip fad is a ridiculous healdit.

except it isn't: if enough gamblers stick to one ticker, they can break the market. options aren't roulette and stocks aren't blackjack. casinos don't have this failure mode. gamestop was the example of what happens in the limit - only the DTCC prevented a global financial crisis as a circuit breaker of last resort.

If enough retailers work in concert they start to resemble HF's.

>> if enough gamblers stick to one ticker, they can break the market

HF's, I assume, has had this power all along and they probably tried more than once to break the market.

So, what's the difference then, between internet hive minds and HFs and why should one take more blame than the other when it comes to "breaking things"?

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

#99

Post by gruez »

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.

spoiler: it won't. There's going to be outperformers, just like if you have 1000 people flipping coins, you're going to find a few with an uncanny ability to get consecutive tails/heads after several flips. That doesn't mean they're any good at it though.

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

#100

Post by chronic2021 »

dasil003 wrote: post #70
chronic2021 wrote: post #58

Earlier quoted context omitted.

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?

If you cherry pick the US S&P (over international, and over small cap), I’m allowed to cherry pick hedge funds.

Many funds consistently outperform the S&P by 2-3X over 30-40 years. Minimum investment, $5-10M, of course.

Buy and hold is the best option for those under USD $10 million net worth, but you must acknowledge there are semi-closed funds/prop trading firms that consistently beat the market.

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