Is long-term value investing more profitable than shorter-term trading?

[Gambit]

The more savvy traders these days diversify through various holding frequencies and across a wide array of domestic & foreign trading instruments. This goes contrary to the group think of most of the one trick poney retail traders.

For example when the market has been at 5 year lows after the crowd puked ut these savvy traders went into value investing mode with a portion of their capital and will still trade shorter and intermediate time frames as the new bull market plays out - rinse & repeat.

Is this what you're doing?

 

[toc]

Somewhere I also read that it has been proven statistically that more you day trade, the more your probabilities of winning trades go down.

Do not know in depth of this logic but it does make sense given the mental toll day trading can take leading to "unforced errors" in decision making.

Also, look at the numbers of CTAs, CPOs and Hedge Fund managers of Forex and other fast lane instruments. Even these what so called Ivy League and well experienced "Top Guns" are not able to return consistently 20% a year and can't blame the "mere size" of the fund alone. Numbers are pretty consistent for AUM of $1M to $50M to $500M.

Best returns out there are 401(k) with 100% matching by the employer. Tax free growth until withdrawl and even 5-7%/year appreciation does lots of good.

 

[Gambit]

Somewhere I also read that it has been proven statistically that more you day trade, the more your probabilities of winning trades go down.

Do not know in depth of this logic but it does make sense given the mental toll day trading can take leading to "unforced errors" in decision making.

Makes sense. Add in costs like spreads and commissions.

 

[sle]

Is this what you're doing?

That's what most successful professionals are doing these days. Instead of searching for that one holy grail, you get a bunch of passable vessels - some made of porcelain and some are tin cups, but as a combination they tend to be as good as a holy grail is.

 

[Gambit]

That's what most successful professionals are doing these days. Instead of searching for that one holy grail, you get a bunch of passable vessels - some made of porcelain and some are tin cups, but as a combination they tend to be as good as a holy grail is.

Thanks for your input. I kind of got that impression from reading AQR's blog and Anti Ilmanen's work.

 

[Gambit]

The more savvy traders these days diversify through various holding frequencies and across many domestic & foreign trading instruments. This goes contrary to the group think - the one trick pony's parroting the trading techniques that don't stand the test of time.

For example when the market has been at 5 year lows after the crowd pukes out, and a base emerges, they adapt with the changing market conditions into value investing with a portion of their capital and will still trade shorter and intermediate time frames as the new bull market plays out.

ent.

Thanks for the tip.

 

[learner88]

Thanks. This is good advice. Have different tricks in the bag to prosper in different kinds of market conditions, though it takes skill to recognize what tricks to apply in what kind of market. Many value investors say market timing is impossible, so they usually stay invested throughout.

That's what most successful professionals are doing these days. Instead of searching for that one holy grail, you get a bunch of passable vessels - some made of porcelain and some are tin cups, but as a combination they tend to be as good as a holy grail is.

 

[fordewind]

Important for learner88 who put up the original question, and for those responding, if we are to have a sensible debate.

learner88 is risking to never achieve your results.you`ve just set the goal for him.

Obviously, you are making the assumption that you have everything that it takes to become the next Maria Sharapova. I am pretty certain it's not true (I've never seen you but I am sure she has nicer legs), plus it's important not to discount the value of luck along the way to the great success.

On topic now First of all, it's very hard to separate "trading" from "investing" and any cutoff will be arbitrary. If you go down the passive vs active road, there is value to both and it's worth combining them if you have the expertise and the time. Second of all, active investing/trading naturally incorporates frictions and those things add up very quickly (btw, one of the arguments against robe-advising services like Betterment is the transaction costs).

Do you become investor once your trade goes against you?

 

[Simples]

Just to balance the talk about investing being so easy and sound and less cost etc., I've seen people holding and adding all the way to 0-1, in the hopes that this time the company (a solar one) would go up, because "it's the future" (and it is, definately, just not this particular one...). Of course, the industry got exported to China and low cost production (fundamental shift), so this stock just kept going down, not following the "bull market" at all.

So while you hear alot of these so-called "bull markets", you can get stuck with poor performers and it's lethal to add on the way down. Only in hindsight do these bull markets exist, and they don't mean every stock was winning. The losing stocks just got devalued away from the index while the rising market caps kept pushing the index upward! Thus "bull market" was born. Exchanges are designed that way they ensure a rising market, along with inflation and other devaluing techniques out there.

 

[Handle123]

Sometimes you start out thinking it be short term trade, but I am still holding onto stocks from 2009, so does that make me an investor? But I have added on various times and started dumping half of new position at so much profit and keep other half, to now taking profit at 90% and holding 10%. Either be a genius if market tanks in next year or robbed myself of much if don't. But I also look at it this way, where can I make the most in terms of cash as it costs so much trading stocks than commodities cause margins less in commodities but fees certainly more in commodities cause of rolling over. I don't think of tax issues as 98% in 401k LLC.

....

For example when the market has been at 5 year lows after the crowd pukes out, and a base emerges, they adapt with the changing market conditions into value investing with a portion of their capital and will still trade shorter and intermediate time frames as the new bull market plays out.

ent.

I do something very much the same and done well but with sectors of the S&P 500, I believe there are 13 sectors, if a sector been 4 of 5 years in lowest 2 levels, last trading day of last year, whatever I had in that account is exited and new ones get bought, if there are no sectors that met rules, if there was any stocks for the year, they are exited. I don't hedge them and no stops used and don't check them for three months.

Last two years have sold off my real estate holdings that was in my 401k LLC, wanting to go different direction in my life, it truly amazing that at some point everyday problems of owning a business, are not problems as you have all the answers from years of doing it. And when you started from ground up, no one can slip a fast one on you.

Hope all have a Better New Year.