5 ms·

Why is buy and hold a "pessimal strategy"?

mattbrewsbytes 4y ago
For example, say you left a company and transferred a 401k balance into Vanguard and put it into VTSAX (total stock market ETF) with no ongoing deposits. Lets say you thought the market was going to go down and on Jan 3rd 2022 you yoinked out your entire balance which for the sake of easy math was exactly $100k (not take a withdrawal, just pull it from the ETF). Today you would still have $100k sitting there in a placeholder account earning $0 (its like a no-mans-land account for moving money in between funds, or if you were prepping an actual withdrawal). If you let that $100k balance stay in VTSAX on Jan 3rd, you would be -19.15% and have $80,850 sitting there today. Granted in this example there aren't regular deposits going in so it really is just money parked there. If you are continually contributing money into a 401k or other tax deferred account, contributing as the market goes down is fine because you're averaging down with the market. Or maybe its not fine depending on your personal circumstances (i.e. going to retire soon or something like that).
- NegativeK 4y ago
  I've always interpreted Buffet's advice as aimed at time periods way longer than one year.
  - daniel-cussen 4y ago
    Not like he has a fucking Bloomberg terminal with no latency or anything. Like he can't spell out FPGA's but he delegates. Not half as senile as he makes himself look, not a shit mathematician at all, not a folklore-driven dude that anybody can imitate (counterfactual, that's part of the business), publishes information on his colon biopsies for a reason, he is rich because he wants to be rich, he likes money. Plus he's the designated "Richest Man in the World" trading off with Bill Gates like they're a wrestling team. Makes no fucking sense, wealth has been aggregating incredibly for thirty years, rich getting richer, more stratified, more clustered, according to literally everyone even USG census, everyone. But the richest man in the world has had 60 billion dollars on the nose since 2000? What the fuck? Apparently now it's a little higher, Jeff Bezos and Elon Musk, at like $160 or some billion...like no it's not. Diminished variance stedda amplified variance. Silva Paradox, http://fgemm.com http://fgemm.com. An actual valuation of their wealth would significantly diminish it, and inform others of it, they don't know really. Only a hobo can look in his pocket and say "I have 550 pesos" a rich man it's like either his company has a fluctuating market cap or he needs armies of accountants and lawyers and like occasionally vudu priests literally "Vudunomics" like they believe in magic. Why not? There can be a physics explanation behind it that will not be understood for hundreds of years, if it works hell. Yeah. If it works Hell. White magic or black magic? Well preferably white but when told that requires giving all wealth away to the poor as the first step, they like say...uh...what's the other one? Be richer and richer, always, black magic. OK that works better. And the richest men wrestling team agreed to give half their wealth away, which is OK that's cool in principle, I don't have a read on that. What I can say is white magic simply is hard, you can't successfully give away all your money, you end up with more even more money, and then you give that away and you get it all back, give all all of it away get down to a penny. Apologize to a beggar when you give it to him (it's considered insulting) dude riches leak into your ascetic life, from every nook and cranny, out of nowhere like not quite to the point of finding cash on the sidewalk (who knows, any day now, it's becoming a sick game). Spesh when you have faith, a mustard seed, thing is a mustard seed is a huge amount of neurons, that's a subsection of your brain that needs to germinate from somewhere, very tricky very tricky, and it doesn't work at all half-way. It's all or nothing. Saying more would make it impossible for you to develop it. Matthew 17:20, that's all I got, that's all you need. Whereas if Warren Buffett asks me, I'd say "you're rich." Simple as that, and that's the actual question, it's in practice binary, does he have to worry about money or not? No because he's rich. No, Buffett has no bloomberg terminals, no technology he does understand (he gets for instance stock tickers, gets a ton of things, plays dumb, and some stuff he does in fact not get and is truthful about it, like investing in Apple, he doesn't get that). Yeah bajillion dollars and gets his information for free on yahoo finance like you or me.
    - llampx 4y ago
      The best application of GPT-3 I've seen.
      - daniel-cussen 4y ago
        The best application of GPT-3 I've seen.
daniel-cussen 4y ago
[I talk about predicting the future in this essay. I mention that up front because maybe then you can take on the walls of text.] Companies always go to shit eventually and you're left holding the bag. Spesh because there's no dividends and companies never wind down, they just do gambits with borrowed money. That's the Way of the American CEO. Dude these dumbasses even publish books about that being the way, like Jack Welch's suckafucking book Straight from the Gut yeah spilled his guts alright. That means that when they can't pay that debt, the creditors have priority, shares get no part of any of the money. So CEOs can't own debt on their own company (I think, there's rules, like they all get broken but there's still rules and breaking them has a cost like in slaps on the wrist, like it has to be very intermediated, because otherwise duh first thing everybody would do is short the company they run and fly it into a mountain). So it looks very smooth, very well thought-out, high-integrity, the American tax system is like that too, looks air tight on form 1040, and if you dig it looks more and more airtight until--whoosh cracked window on an airplane everything flying out. Nah. Dude get in and get the fuck out. Know when to sell. Bill Browder, whom I don't think much of in most regards and have ripped on here explained why he's a nomad. But having talked him down, he does say smart dead-on-the-money intel. You gotta know first off when to get in. Under the thesis that it's exponential (it's impossible to respect that thesis, cubic at best, cubic is short and sweet, "ex-po-nen-tial" is a mouthful) so you can get in whenever it makes no difference. There's no sexy part of the exponential, every part of the exponential is sexy. Like I don't know I got advice like get out right when it's taking off--it never takes off. It's identical to its derivative, no inflection points, no maxima, no minima, it's the comparable in its uniformity to a flatline. In a sense it is a flatline because of inflation, that connects both curves, e^x - e^x = 0, f(x)=0 is the flatline. Alternately, e^x / e^x = 1, f(x)=1, though that's a totally different flatline. So there is a moment to get in and that's when there's a genuine crash that nobody saw coming, that later is said to be impossible to predict--dude that's when. But to get in at that point you need to have gotten out before then, ideally at the peak. So because of relativity you can't react to the peak, see oh it just peaked time to sell--no there's a delay, like coupla hours for a customer to talk to his broker, so gotta preempt the peak by a coupla hours, that means gotta give the sell order pre-peak--meaning while it's still going up according to some smooth description of the Brownian curve (you never see it in the full grain, that information costs money an hn user doesn't pay). So it's critical your broker try to talk you out of it--that's a very good sign, just convince him you're stupid and he'll say "eh, masochist"--that's exactly what you want to hear. Because if you do depart the cyclical assets at the peak of the cycle and transfer it to countercyclical assets, then you get a bonus from them (not much, gold is politically oppressed by practically all empires, only one exception) so like gold won't double, but in my analysis that's because it's too feared so instead Bitcoin would jump, and I bet on it on margin almost at the trough, and I got 90% of the appreciation in Oct-Nov last year. So that's the thing, selling near the top. So it's a totally political move, just like predicting the peak on Sep 27 (when the Fed announced the rate hikes, charts lie inflation lies that was the peak that was when the shit got really sticky and the pipes backed up) 30 days before. So for my personal protection, in order not to be subjected to additional psychiatric malpractice and experiments and all that shit, instead of saying my spine gave me a trillion-dollar twitch, I will play the fool card and say it was a quadrillion dollar twitch. What's the difference? For me both are infinite resources, even a million dollars is infinite resources. The difference--even if I say this explicitly--is when I say quadrillion shrinks say I'm crazy, which is good that's what I want. Chose which ward I end up in carefully. Dude no spinal taps.
01100011 4y ago
IDK what OP believes, but to me, the "Boglehead" strategy is great, with giant caveats. Most devotees I talk to get visibly frustrated when I suggest that you can look at larger macroeconomic forces, like COVID, supply chain issues, Fed manipulations(both positive and negative) and make educated predictions on the direction of stocks. My guess is that these are folks who just don't want the frustration of learning about these things, and I get that. It is a significant cognitive load to maintain an understanding and awareness of market influencing factors. I use a family member as an example who was told by their money manager to move to cash at the beginning of the year. That wasn't just dumb luck. Was it a sure bet? Nothing is in this world. Do you bring a winter coat to a July outdoor event in Phoenix? I mean, it could be cold, right? But yet the writing was on the wall for the direction equities and bonds would take this year. Can you perfectly time the bottom? No. It's also important not to be too conservative. The majority of gains in a stock market cycle are made in the first sprint out of the gate when everyone is still fearful. But you can know when things are peaking and GTFO before the slide. You don't need to be Michael Burry to spot these things either. You just need to not watch CNBC and Cramer or any of the other paid shills.
- nly 4y ago
  The problem with timing the market is you have to be right twice - you have to choose when to sell and when to buy back in. On the other hand, DCA'ing you way through a market decline and recovery will always leave you in a better position than one where the crash never happened.
  - 01100011 4y ago
    > problem with timing the market is you have to be right twice And times like this when macro forces dominate it's not hard to predict. If you're talking about timing entry/exit over the past decade, sure, but now is not then, and it's bogleheads refusal to see that which is most frustrating. But I'll say again, you don't need to nail it. Don't try to time the exact top and bottom, but don't pretend you can't get close.
    - 4y ago

For example, say you left a company and transferred a 401k balance into Vanguard and put it into VTSAX (total stock market ETF) with no ongoing deposits. Lets say you thought the market was going to go down and on Jan 3rd 2022 you yoinked out your entire balance which for the sake of easy math was exactly $100k (not take a withdrawal, just pull it from the ETF). Today you would still have $100k sitting there in a placeholder account earning $0 (its like a no-mans-land account for moving money in between funds, or if you were prepping an actual withdrawal). If you let that $100k balance stay in VTSAX on Jan 3rd, you would be -19.15% and have $80,850 sitting there today. Granted in this example there aren't regular deposits going in so it really is just money parked there. If you are continually contributing money into a 401k or other tax deferred account, contributing as the market goes down is fine because you're averaging down with the market. Or maybe its not fine depending on your personal circumstances (i.e. going to retire soon or something like that).

NegativeK 4y ago
I've always interpreted Buffet's advice as aimed at time periods way longer than one year.
- daniel-cussen 4y ago
  Not like he has a fucking Bloomberg terminal with no latency or anything. Like he can't spell out FPGA's but he delegates. Not half as senile as he makes himself look, not a shit mathematician at all, not a folklore-driven dude that anybody can imitate (counterfactual, that's part of the business), publishes information on his colon biopsies for a reason, he is rich because he wants to be rich, he likes money. Plus he's the designated "Richest Man in the World" trading off with Bill Gates like they're a wrestling team. Makes no fucking sense, wealth has been aggregating incredibly for thirty years, rich getting richer, more stratified, more clustered, according to literally everyone even USG census, everyone. But the richest man in the world has had 60 billion dollars on the nose since 2000? What the fuck? Apparently now it's a little higher, Jeff Bezos and Elon Musk, at like $160 or some billion...like no it's not. Diminished variance stedda amplified variance. Silva Paradox, http://fgemm.com http://fgemm.com. An actual valuation of their wealth would significantly diminish it, and inform others of it, they don't know really. Only a hobo can look in his pocket and say "I have 550 pesos" a rich man it's like either his company has a fluctuating market cap or he needs armies of accountants and lawyers and like occasionally vudu priests literally "Vudunomics" like they believe in magic. Why not? There can be a physics explanation behind it that will not be understood for hundreds of years, if it works hell. Yeah. If it works Hell. White magic or black magic? Well preferably white but when told that requires giving all wealth away to the poor as the first step, they like say...uh...what's the other one? Be richer and richer, always, black magic. OK that works better. And the richest men wrestling team agreed to give half their wealth away, which is OK that's cool in principle, I don't have a read on that. What I can say is white magic simply is hard, you can't successfully give away all your money, you end up with more even more money, and then you give that away and you get it all back, give all all of it away get down to a penny. Apologize to a beggar when you give it to him (it's considered insulting) dude riches leak into your ascetic life, from every nook and cranny, out of nowhere like not quite to the point of finding cash on the sidewalk (who knows, any day now, it's becoming a sick game). Spesh when you have faith, a mustard seed, thing is a mustard seed is a huge amount of neurons, that's a subsection of your brain that needs to germinate from somewhere, very tricky very tricky, and it doesn't work at all half-way. It's all or nothing. Saying more would make it impossible for you to develop it. Matthew 17:20, that's all I got, that's all you need. Whereas if Warren Buffett asks me, I'd say "you're rich." Simple as that, and that's the actual question, it's in practice binary, does he have to worry about money or not? No because he's rich. No, Buffett has no bloomberg terminals, no technology he does understand (he gets for instance stock tickers, gets a ton of things, plays dumb, and some stuff he does in fact not get and is truthful about it, like investing in Apple, he doesn't get that). Yeah bajillion dollars and gets his information for free on yahoo finance like you or me.
  - llampx 4y ago
    The best application of GPT-3 I've seen.
    - daniel-cussen 4y ago
      The best application of GPT-3 I've seen.

daniel-cussen 4y ago

[I talk about predicting the future in this essay. I mention that up front because maybe then you can take on the walls of text.] Companies always go to shit eventually and you're left holding the bag. Spesh because there's no dividends and companies never wind down, they just do gambits with borrowed money. That's the Way of the American CEO. Dude these dumbasses even publish books about that being the way, like Jack Welch's suckafucking book Straight from the Gut yeah spilled his guts alright. That means that when they can't pay that debt, the creditors have priority, shares get no part of any of the money. So CEOs can't own debt on their own company (I think, there's rules, like they all get broken but there's still rules and breaking them has a cost like in slaps on the wrist, like it has to be very intermediated, because otherwise duh first thing everybody would do is short the company they run and fly it into a mountain). So it looks very smooth, very well thought-out, high-integrity, the American tax system is like that too, looks air tight on form 1040, and if you dig it looks more and more airtight until--whoosh cracked window on an airplane everything flying out. Nah. Dude get in and get the fuck out. Know when to sell. Bill Browder, whom I don't think much of in most regards and have ripped on here explained why he's a nomad. But having talked him down, he does say smart dead-on-the-money intel. You gotta know first off when to get in. Under the thesis that it's exponential (it's impossible to respect that thesis, cubic at best, cubic is short and sweet, "ex-po-nen-tial" is a mouthful) so you can get in whenever it makes no difference. There's no sexy part of the exponential, every part of the exponential is sexy. Like I don't know I got advice like get out right when it's taking off--it never takes off. It's identical to its derivative, no inflection points, no maxima, no minima, it's the comparable in its uniformity to a flatline. In a sense it is a flatline because of inflation, that connects both curves, e^x - e^x = 0, f(x)=0 is the flatline. Alternately, e^x / e^x = 1, f(x)=1, though that's a totally different flatline. So there is a moment to get in and that's when there's a genuine crash that nobody saw coming, that later is said to be impossible to predict--dude that's when. But to get in at that point you need to have gotten out before then, ideally at the peak. So because of relativity you can't react to the peak, see oh it just peaked time to sell--no there's a delay, like coupla hours for a customer to talk to his broker, so gotta preempt the peak by a coupla hours, that means gotta give the sell order pre-peak--meaning while it's still going up according to some smooth description of the Brownian curve (you never see it in the full grain, that information costs money an hn user doesn't pay). So it's critical your broker try to talk you out of it--that's a very good sign, just convince him you're stupid and he'll say "eh, masochist"--that's exactly what you want to hear. Because if you do depart the cyclical assets at the peak of the cycle and transfer it to countercyclical assets, then you get a bonus from them (not much, gold is politically oppressed by practically all empires, only one exception) so like gold won't double, but in my analysis that's because it's too feared so instead Bitcoin would jump, and I bet on it on margin almost at the trough, and I got 90% of the appreciation in Oct-Nov last year. So that's the thing, selling near the top. So it's a totally political move, just like predicting the peak on Sep 27 (when the Fed announced the rate hikes, charts lie inflation lies that was the peak that was when the shit got really sticky and the pipes backed up) 30 days before. So for my personal protection, in order not to be subjected to additional psychiatric malpractice and experiments and all that shit, instead of saying my spine gave me a trillion-dollar twitch, I will play the fool card and say it was a quadrillion dollar twitch. What's the difference? For me both are infinite resources, even a million dollars is infinite resources. The difference--even if I say this explicitly--is when I say quadrillion shrinks say I'm crazy, which is good that's what I want. Chose which ward I end up in carefully. Dude no spinal taps.

01100011 4y ago

IDK what OP believes, but to me, the "Boglehead" strategy is great, with giant caveats. Most devotees I talk to get visibly frustrated when I suggest that you can look at larger macroeconomic forces, like COVID, supply chain issues, Fed manipulations(both positive and negative) and make educated predictions on the direction of stocks. My guess is that these are folks who just don't want the frustration of learning about these things, and I get that. It is a significant cognitive load to maintain an understanding and awareness of market influencing factors. I use a family member as an example who was told by their money manager to move to cash at the beginning of the year. That wasn't just dumb luck. Was it a sure bet? Nothing is in this world. Do you bring a winter coat to a July outdoor event in Phoenix? I mean, it could be cold, right? But yet the writing was on the wall for the direction equities and bonds would take this year. Can you perfectly time the bottom? No. It's also important not to be too conservative. The majority of gains in a stock market cycle are made in the first sprint out of the gate when everyone is still fearful. But you can know when things are peaking and GTFO before the slide. You don't need to be Michael Burry to spot these things either. You just need to not watch CNBC and Cramer or any of the other paid shills.

nly 4y ago
The problem with timing the market is you have to be right twice - you have to choose when to sell and when to buy back in. On the other hand, DCA'ing you way through a market decline and recovery will always leave you in a better position than one where the crash never happened.
- 01100011 4y ago
  > problem with timing the market is you have to be right twice And times like this when macro forces dominate it's not hard to predict. If you're talking about timing entry/exit over the past decade, sure, but now is not then, and it's bogleheads refusal to see that which is most frustrating. But I'll say again, you don't need to nail it. Don't try to time the exact top and bottom, but don't pretend you can't get close.
  - 4y ago