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From the comments here, I think most people just read the headline. The article looked at 50/200 day simple moving average crossovers on the S&P 500 index (usi
by slashdev 3y ago
From the comments here, I think most people just read the headline.
The article looked at 50/200 day simple moving average crossovers on the S&P 500 index (using SPY etf). Which are really just indicators of momentum. Buy when going up, sell when going down. This underperformed just buying and holding the SPY 480% return versus 520% over the last 25 years. However, it avoided big draw downs, so the risk adjusted return was better. In other words, it works in a world with no trading commissions and no bid ask spread. Is it worth it in real life? Probably not.
- nonethewiser 3y agoExcept there are lots of commission free trading options.
- zer0tonin 3y agoTransaction costs are not limited to broker fees, you also pay the spread and eventually slippage. That's why I didn't include them in the article, that's too many variables and I'm lazy.
- nonethewiser 3y agoSlashdev explicitly differentiated between commissions and spread which is what im responding to. So my point stands.
- amerkhalid 3y agoThat is very recent though.
- fantasticshower 3y agoHow many people really buy and hold and don't question their strategy when the 30%+ drawdowns come? We know sticking to your plan is key to long term success. Can the masses stick to simple buy and hold long term?
- nonethewiser 3y agoAlmost no one that trades for a living, including finance professionals. Lots of people saving for retirement do though.
- fantasticshower 3y agoLots of people have stronger stomachs for drawdowns than I do then!
- nonethewiser 3y agoIt’s basically just determined by how closely you are watching the market.
- phil21 3y agoIt's why having a plan and a strong conviction of that plan (for me this means having to schedule time to purposefully "sit down" with myself quarterly to ensure the plan is still accurate) is so important. When the shit hits the fan you want to be able to realize you are dealing with emotion, and to go look at your pre-flight checklist so to speak before you sell anything. If pre-set conditions aren't met, you have no decisions to make. If you go into a "situation" thinking you are already overleveraged or whatever, you are much more likely to do something silly vs. if you went into the same situation comfortable in the logic of how you have your finances configured.
- sxg 3y agoYou don’t have to have a strong stomach if you don’t pay attention to the market. Buy and hold or “set and forget” are legitimately good strategies at least in part because of this reason.
- fantasticshower 3y agoOf course you also have to believe the theory of buy and hold is sound and likely to work in the future. I think that's another part of why I struggle with it.
- kwar13 3y agoHow can you possibly test a hypothesis with one single point of data?
- slashdev 3y agoHow is 25 years a single point of data?
- kwar13 3y agoIt doesn't quite matter how long the years of data are, it is still one single timeseries. That's one of the most important things in time series econometrics. You need to test long time series along multiple securities preferably across different geographies. Taking a 50/200 MA crossover over a single ETF literally proves nothing.
- slashdev 3y agoIt’s the S&P 500, the most heavily traded index in the world. Not a single ticker.