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Long-Term Trading Strategy That Should Work
- Thread starter kenwx23
- Start date
Quote from kenwx23:
Totally agree with the assessment that the market could trade down 50% and then trade sideways for 15+ years. Martingale implies increasing bets on the way down. It's not Martingale, but I see why the comparison is being made.
As far as comparing it to past bear markets, the only peak that has yet to be recovered is 2007. But I'd still be up even if I used the peak. I have not considered inflation, that's where just buying and holding would prevail, but not if you get a 50% drawdown and sideways trading for 15 years..
There was a very long thread on this a few months back where we went over the math in explicit detail. Basically, there are two primary outcomes. Either you earn the equivalent of a money market return over the next 10 years or you lose a substantial sum of money. There is not much in between. The reason for this is because you need to buy very small amounts of shares to insure you can scale down 50%. The small moderate drawdowns in the market will not be enough to get you enough long exposure.
You are better off just buying a CD and earning 2%. That way you get the same upside without the unlimited downside.
If you want the risk, you are better off just buying and holding a full position in SPY. You have the same downside risk but at least you get the upside if we rally. You are doing the worst of both of those. You are accepting all the downside risk but getting none of the upside. The math has been drawn out on the previous thread where examples were given of buying on the way down and what the long term return came out to be. It was very very small.
Hell, you might as well just sell naked puts every month.
Quote from Maverick74:
There was a very long thread on this a few months back where we went over the math in explicit detail. Basically, there are two primary outcomes. Either you earn the equivalent of a money market return over the next 10 years or you lose a substantial sum of money. There is not much in between. The reason for this is because you need to buy very small amounts of shares to insure you can scale down 50%. The small moderate drawdowns in the market will not be enough to get you enough long exposure.
You are better off just buying a CD and earning 2%. That way you get the same upside without the unlimited downside.
If you want the risk, you are better off just buying and holding a full position in SPY. You have the same downside risk but at least you get the upside if we rally. You are doing the worst of both of those. You are accepting all the downside risk but getting none of the upside. The math has been drawn out on the previous thread where examples were given of buying on the way down and what the long term return came out to be. It was very very small.
Hell, you might as well just sell naked puts every month.
I will search for that thread and get an education on this. I've searched a lot for that sort of analysis but had difficulty finding anything definitive. My concern was also not having capital in play during up trends which logically is when you'd want the most exposure.
Thank you!
Quote from kenwx23:
I will search for that thread and get an education on this. I've searched a lot for that sort of analysis but had difficulty finding anything definitive.
Try searching for info on portfolio rebalancing strategies (constant mix, cppi, etc.) and you should find more info on what you're trying to do.