“Buy and Hold No More” says A16Z

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KittyCorner
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“Buy and Hold No More” says A16Z

Post by KittyCorner »

I’m not buying it, but I’d be curious to hear this forum’s take on this A16Z blog post: https://a16z.com/2021/03/29/active-trading/

My $0.02 cents is that tech has made it easier than ever to put money in motion and that everyone’s a winner in the current market, thus the current exuberance.
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Re: “Buy and Hold No More” says A16Z

Post by Adfmacro »

A quote from the article “ most retail traders to believe they have above-average trading ideas and strategies.” How can MOST be right? Are both the buyers and sellers right? Maybe “most retail traders” have misplaced confidence in themselves. I guess I am not even among the minority since I do not even consider myself as a trader at all.
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Re: “Buy and Hold No More” says A16Z

Post by drk »

Disclaimers notwithstanding, the firm is talking its book: Andreesen Horowitz is an investor in many of these disruptive fintech companies that hope to fill the active trading role in individual portfolios. Oddly, it's also a lead investor in the new Long-Term Stock Exchange, which aims to enforce "long-term thinking" at the exchange level and would presumably encourage buy-and-hold (active) investing.
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Re: “Buy and Hold No More” says A16Z

Post by greg24 »

"Buy and Hold is the best answer for most investors" says greg24
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Re: “Buy and Hold No More” says A16Z

Post by Tom_T »

I've looked at some of the Reddit threads by this new breed of "investor." There are a lot of complaints about losses. Also, a lot of bravado like "I'm holding!" They don't seem to realize that when a stock is being talked up online, and the price is $5, it doesn't mean $5 is a bargain -- it means $5 is likely the pumped-up price.
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Re: “Buy and Hold No More” says A16Z

Post by Doctor Rhythm »

Maybe people will take my ideas more seriously if I were to changed my name to D11M.
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Re: “Buy and Hold No More” says A16Z

Post by nisiprius »

I accept the likely truth that something has changed between 2019 and 2021, in that the confluence of a long bull market with other things (shutdown of sports betting, creating of gamified investing tools) has just recruited a new cohort of retail investors into a resurgence of speculative mania. It's not surprising. The exact form varies, but fundamentally Robinhood and Reddit are just this decade's version of "day-trading," or pre-1920 "bucket shops" (used a stock ticker to settle bets, did not actually perform any stock transactions).

The narrative of small retail investors breaking all the rules and beating the pros is hardly new, either. In fact it's one of the, uh, hooks used to ensnare them.

Some will remember the era of the "Beardstown Ladies." When the market was rising so steadily and rapidly that it was difficult not to make money in stocks, a flurry of stories emerged about ordinary folk whipping the professionals with green eyeshades, by using their native gumption. In the 1990s, a series of bestsellers explained how a small-town investment club beat the S&P 500. It turned out that they had indeed made money, but had messed up the return calculations and weren't equalling the S&P 500 at all.

Those were the says Peter Lynch seemed to be suggesting that our keen consumer insights amount to a kind of inside information, and that cold-hearted analysis of balance sheets could never match the persona knowledge of someone who actually bought and used the company's products.

I am too lazy to actually do it, but I am pretty sure you could find headlines from literally every year for the last 25 years saying "buy and hold is dead."
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Re: “Buy and Hold No More” says A16Z

Post by Broken Man 1999 »

nisiprius wrote: Sat Apr 10, 2021 3:43 pm I accept the likely truth that something has changed between 2019 and 2021, in that the confluence of a long bull market with other things (shutdown of sports betting, creating of gamified investing tools) has just recruited a new cohort of retail investors into a resurgence of speculative mania. It's not surprising. The exact form varies, but fundamentally Robinhood and Reddit are just this decade's version of "day-trading," or pre-1920 "bucket shops" (used a stock ticker to settle bets, did not actually perform any stock transactions).

The narrative of small retail investors breaking all the rules and beating the pros is hardly new, either. In fact it's one of the, uh, hooks used to ensnare them.

Some will remember the era of the "Beardstown Ladies." When the market was rising so steadily and rapidly that it was difficult not to make money in stocks, a flurry of stories emerged about ordinary folk whipping the professionals with green eyeshades, by using their native gumption. In the 1990s, a series of bestsellers explained how a small-town investment club beat the S&P 500. It turned out that they had indeed made money, but had messed up the return calculations and weren't equalling the S&P 500 at all.

Those were the says Peter Lynch seemed to be suggesting that our keen consumer insights amount to a kind of inside information, and that cold-hearted analysis of balance sheets could never match the persona knowledge of someone who actually bought and used the company's products.

I am too lazy to actually do it, but I am pretty sure you could find headlines from literally every year for the last 25 years saying "buy and hold is dead."
Buy and hold being dead isn't the all that bad as a headline. Anyone remember The Death of Equities? Yet, here we are!

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Re: “Buy and Hold No More” says A16Z

Post by bertilak »

Adfmacro wrote: Sat Apr 10, 2021 2:53 pm A quote from the article “ most retail traders to believe they have above-average trading ideas and strategies.” How can MOST be right?
They can ALL "believe" but that doesn't make ANY of them right.
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Re: “Buy and Hold No More” says A16Z

Post by Desx »

bertilak wrote: Sat Apr 10, 2021 5:33 pm
Adfmacro wrote: Sat Apr 10, 2021 2:53 pm A quote from the article “ most retail traders to believe they have above-average trading ideas and strategies.” How can MOST be right?
They can ALL "believe" but that doesn't make ANY of them right.
Well, many of them were validated by Tesla first, then Gamestop. AMD, AAPL, plenty of validations.

I don't partake in any of that, but have friends who do and none have failed. One, at 24, made 600k off gamestop, one was very much a believer in Tesla, then moved onto amc after making a nice profit off tesla. Got into amc before shorts were forced to cover and did quite well. Another believed in BTC. Tesla and Gamestop were heavily shorted stocks by professionals where they lost and retail investors who loved memes caused those losses. I would say understanding that the movement of a subreddit could cause a hedge fund to be forced to cover a short position and thus making youtube videos and posts about it like Keith Gill did was an above average idea.


What actually gives companies value is consumers, the people who buy their product and generate their revenue. To say at least some of them don't know what consumers like and arent able to see a product and say, "People will LOVE THIS!", is crazy. These run ups are more like voting than they are the traditional investing. Predicting what others will vote for next has massive rewards. Some get it right, some fail. Many people who put their entire net worth into options won't end up happy.

You would have to be pretty boring to say it isn't fun to watch. One guy nearly had to take delivery of thousands of barrels of oil, ended up making over 20k. https://www.reddit.com/r/wallstreetbets ... 6000_sort/


If you really want to see how retail investors can do check out weramp. It is a portfolio where the manager selects stocks by running a twitter poll and having people vote. It did well last year if I recall, way better than the s&p. Not as good this year but not terrible.
Last edited by Desx on Sat Apr 10, 2021 6:30 pm, edited 1 time in total.
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Re: “Buy and Hold No More” says A16Z

Post by SlowMovingInvestor »

Desx wrote: Sat Apr 10, 2021 6:00 pm
bertilak wrote: Sat Apr 10, 2021 5:33 pm
Adfmacro wrote: Sat Apr 10, 2021 2:53 pm A quote from the article “ most retail traders to believe they have above-average trading ideas and strategies.” How can MOST be right?
They can ALL "believe" but that doesn't make ANY of them right.
Well, many of them were validated by Tesla first, then Gamestop.
I don't claim to read wsb on a regular basis, indeed I barely knew about it before Gamestop. But going over the threads since, I've seen lots of threads about people who lost money with options on stock X, Y etc. Even some of the meme stocks. Even GME, those who came in late or refused to exit didn't do well. Yes, some people (DFV obviously) did very well with GME, but that 'many' were validated seems exaggerated.

[ I'm not even sure that TSLA's jump was a retail phenomenon so much as the company finally shrugging off operational problems]

But about the article -- it says that people tend to overestimate their trading skills. I think that's very likely, especially when people haven't experienced a drawn out bear market -- a few weeks in Mar 2020 or even a year in 2008 doesn't count.
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Re: “Buy and Hold No More” says A16Z

Post by watchnerd »

I certainly don't believe in buy and hold when it comes to TBM.

3 fund portfolio looks outdated to me given a post-QE world.

Making a good income as a lender via "safe" fixed income instruments is dead; there is simply too much money in the world now to reward risk-free capital. The 21st century will require investors to be aggressive with their capital to keep up.

And I think "retail level leverage" on the cheap in the form of specialty ETFs make improvements in Sharpe ratio and capital efficiency something more practical for individual investors to explore in ways that it simply wasn't in the past.

I believe "smart passive" and "geared passive" will continue to challenge older methods when it comes to portfolio construction.

Let the barbs fly...
Last edited by watchnerd on Sat Apr 10, 2021 6:42 pm, edited 2 times in total.
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Re: “Buy and Hold No More” says A16Z

Post by SlowMovingInvestor »

watchnerd wrote: Sat Apr 10, 2021 6:32 pm And I think "retail level leverage" on the cheap in the form of specialty ETFs make improvements in Sharpe ratio and capital efficiency something more practical for individual investors to explore in ways that it simply wasn't in the past.
I'm not sure I understand this statement. Could you expand ?
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Re: “Buy and Hold No More” says A16Z

Post by watchnerd »

SlowMovingInvestor wrote: Sat Apr 10, 2021 6:35 pm
watchnerd wrote: Sat Apr 10, 2021 6:32 pm And I think "retail level leverage" on the cheap in the form of specialty ETFs make improvements in Sharpe ratio and capital efficiency something more practical for individual investors to explore in ways that it simply wasn't in the past.
I'm not sure I understand this statement. Could you expand ?
There are many, from the extreme 2x-3x leveraged ETFs to more modest offerings like NTSX or various "enhanced" bond funds.
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Re: “Buy and Hold No More” says A16Z

Post by Desx »

SlowMovingInvestor wrote: Sat Apr 10, 2021 6:30 pm
Desx wrote: Sat Apr 10, 2021 6:00 pm
bertilak wrote: Sat Apr 10, 2021 5:33 pm
Adfmacro wrote: Sat Apr 10, 2021 2:53 pm A quote from the article “ most retail traders to believe they have above-average trading ideas and strategies.” How can MOST be right?
They can ALL "believe" but that doesn't make ANY of them right.
Well, many of them were validated by Tesla first, then Gamestop.
I don't claim to read wsb on a regular basis, indeed I barely knew about it before Gamestop. But going over the threads since, I've seen lots of threads about people who lost money with options on stock X, Y etc. Even some of the meme stocks. Even GME, those who came in late or refused to exit didn't do well. Yes, some people (DFV obviously) did very well with GME, but that 'many' were validated seems exaggerated.

[ I'm not even sure that TSLA's jump was a retail phenomenon so much as the company finally shrugging off operational problems]

But about the article -- it says that people tend to overestimate their trading skills. I think that's very likely, especially when people haven't experienced a drawn out bear market -- a few weeks in Mar 2020 or even a year in 2008 doesn't count.
It is not just gamestop, AMD was a huge favorite, AAPL was well during the pandemic. Palantir technolgies. SPCE (Virgin galatic). I remember spce, I thought it was the dumbest thing in the entire world. Its up over 180% from Oct 2019 when I thought wow this is stupid and can't end well I'm going to continue DCAing into index fund.


I don't get the "people overestimate their trading skills" as the main point of the article. I get "We believe that in the years to come, active strategies will have a place in every retail investor’s portfolio."

For what it's worth, I don't pick any stocks, I index. I also believe the next bear market will see lots of people run away. Maybe even me if its real bad and I begin to doubt myself. But I agree with this article in the regard that people are not wrong to actively invest instead of just indexing because the efficient market hypothesis, is, in my eyes, fake.
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Re: “Buy and Hold No More” says A16Z

Post by watchnerd »

Desx wrote: Sat Apr 10, 2021 6:41 pm
It is not just gamestop, AMD was a huge favorite, AAPL was well during the pandemic. Palantir technolgies. SPCE (Virgin galatic). I remember spce, I thought it was the dumbest thing in the entire world. Its up over 180% from Oct 2019 when I thought wow this is stupid and can't end well I'm going to continue DCAing into index fund.


I don't get the "people overestimate their trading skills" as the main point of the article. I get "We believe that in the years to come, active strategies will have a place in every retail investor’s portfolio."

For what it's worth, I don't pick any stocks, I index. I also believe the next bear market will see lots of people run away. Maybe even me if its real bad and I begin to doubt myself. But I agree with this article in the regard that people are not wrong to actively invest instead of just indexing because the efficient market hypothesis, is, in my eyes, fake.
#memestonks have certainly kicked the legs out from under "hard EMH".
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Re: “Buy and Hold No More” says A16Z

Post by Samosa22 »

nisiprius wrote: Sat Apr 10, 2021 3:43 pm ...

Those were the says Peter Lynch seemed to be suggesting that our keen consumer insights amount to a kind of inside information, and that cold-hearted analysis of balance sheets could never match the persona knowledge of someone who actually bought and used the company's products.
....
One of my best reads so far during this weekend!
Last edited by Samosa22 on Sat Apr 10, 2021 6:49 pm, edited 1 time in total.
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Re: “Buy and Hold No More” says A16Z

Post by SlowMovingInvestor »

Desx wrote: Sat Apr 10, 2021 6:41 pm
It is not just gamestop, A]MD was a huge favorite, AAPL was well during the pandemic. Palantir technolgies. SPCE (Virgin galatic). I remember spce, I thought it was the dumbest thing in the entire world. Its up over 180% from Oct 2019 when I thought wow this is stupid and can't end well I'm going to continue DCAing into index fund.

I don't get the "people overestimate their trading skills" as the main point of the article. I get "We believe that in the years to come, active strategies will have a place in every retail investor’s portfolio."

For what it's worth, I don't pick any stocks, I index. I also believe the next bear market will see lots of people run away. Maybe even me if its real bad and I begin to doubt myself. But I agree with this article in the regard that people are not wrong to actively invest instead of just indexing because the efficient market hypothesis, is, in my eyes, fake.
Lots of tech and tech related stocks did well in the pandemic - Google, Amazon, MSFT. Snowflake had a bigger IPO than PLTR. AirBnB too. I don't think it was just so called meme stocks or WSB favorites.

I'm fine with some active investing or sectoral overloading. Especially when some sectors don't seem to be fully represented by total market indexes. But I still index for the large majority of my portfolio. Not because I believe in EMH, but because it's hard to pick winners consistently.
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Re: “Buy and Hold No More” says A16Z

Post by Normchad »

Man it’s easy to feel like a genius when all you know is an 11 year rising market. I’m a tad worried for all the people “investing” these days, who have absolutely no idea what they’re doing. Articles like this, and WSB on Reddit are drawing them in and really encouraging them. Be real, they are gambling.

Here we go again, everybody thinks they have ‘keen insights’ or can ‘stick it to the man’.

And honestly, there are enough stories now about IPO, Bitcoin, Tesla millionaires that it *feels* like anybody could do it, if they’d just man up.

As for me, I’m not changing anything. Basically boring old 60/40 me, and doing the BH things has led me to top 5% net worth in America, and a nearly retirement. It’s not get rich quick, but it is get rich.

Unfortunately, the good times will inevitably end. Lots of these people will have to bail out. And they will be very bitter, fee,I guess that they were scammed, and it’s all just a casino anyway. The really sad part is, they will then avoid the market in the future, and they will miss out on the good times. This sets people back permanently.
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Re: “Buy and Hold No More” says A16Z

Post by watchnerd »

Normchad wrote: Sat Apr 10, 2021 7:03 pm Man it’s easy to feel like a genius when all you know is an 11 year rising market. I’m a tad worried for all the people “investing” these days, who have absolutely no idea what they’re doing. Articles like this, and WSB on Reddit are drawing them in and really encouraging them. Be real, they are gambling.

Here we go again, everybody thinks they have ‘keen insights’ or can ‘stick it to the man’.

And honestly, there are enough stories now about IPO, Bitcoin, Tesla millionaires that it *feels* like anybody could do it, if they’d just man up.

As for me, I’m not changing anything. Basically boring old 60/40 me, and doing the BH things has led me to top 5% net worth in America, and a nearly retirement. It’s not get rich quick, but it is get rich.

Unfortunately, the good times will inevitably end. Lots of these people will have to bail out. And they will be very bitter, fee,I guess that they were scammed, and it’s all just a casino anyway. The really sad part is, they will then avoid the market in the future, and they will miss out on the good times. This sets people back permanently.
I don't think "kids these days" are much different than I was at the same age during the dotcom boom, working in the tech industry and watching people who go lucky off an IPO to retire in their early 30s.

Somehow I turned out okay, managed to achieve FI by 40. Still working because I love it.

It will be part of the journey and some people will get burnt, but a lot will learn to be smarter / better investors using a new set of tools that didn't exist 20 years ago.
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Re: “Buy and Hold No More” says A16Z

Post by Desx »

Normchad wrote: Sat Apr 10, 2021 7:03 pm Man it’s easy to feel like a genius when all you know is an 11 year rising market. I’m a tad worried for all the people “investing” these days, who have absolutely no idea what they’re doing. Articles like this, and WSB on Reddit are drawing them in and really encouraging them. Be real, they are gambling.

Here we go again, everybody thinks they have ‘keen insights’ or can ‘stick it to the man’.

And honestly, there are enough stories now about IPO, Bitcoin, Tesla millionaires that it *feels* like anybody could do it, if they’d just man up.

As for me, I’m not changing anything. Basically boring old 60/40 me, and doing the BH things has led me to top 5% net worth in America, and a nearly retirement. It’s not get rich quick, but it is get rich.

Unfortunately, the good times will inevitably end. Lots of these people will have to bail out. And they will be very bitter, fee,I guess that they were scammed, and it’s all just a casino anyway. The really sad part is, they will then avoid the market in the future, and they will miss out on the good times. This sets people back permanently.
The only instance of "stick it to the man" I know was the gamestop saga. Melvin capital reported a 50% loss on their short positions in Q1 2021, so I'd say they actually did get it stuck to them. Its not like its a reoccurring theme.

I am not sure why many people on this forum believe that their way is the ONLY way. I mostly index, but I don't believe that it is the ONLY way to be successful and I don't believe I am smarter than others simply because I don't do what they do. It is interesting that so many people say X portfolio is the best because you cannot predict the future while at the same time predicting the future.
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Re: “Buy and Hold No More” says A16Z

Post by bertilak »

Desx wrote: Sun Apr 11, 2021 4:48 am I am not sure why many people on this forum believe that their way is the ONLY way. I mostly index, but I don't believe that it is the ONLY way to be successful and I don't believe I am smarter than others simply because I don't do what they do. It is interesting that so many people say X portfolio is the best because you cannot predict the future while at the same time predicting the future.
When someone says their way is the only way I agree with you but I don't think "many" say that here. I think the primary attitude is "my way is just as good as other ways and is also much simpler. Don't unnecessarily complicate things!"

I also think the emphasis is (generally) NOT on claiming to be smarter than others but the opposite: don't try to outsmart others with the zero-sum games of clever schemes, stock/sector picking, and market timing. Let the smart people fight it out amongst themselves and go with the results: broad market, cap-weighted, index funds. Your stock/bond AA will adjust your desired risk level. Yes, there are other things to think about: taxes, availability of assets in company sponsored plans, social security, etc.. Those depend on individual circumstances but should be guided by basic, universal principles.
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Re: “Buy and Hold No More” says A16Z

Post by Exchme »

Lowering the barriers to market participation to allow very small investors a seat at the table is a good thing; the gamification of the whole process for those new investors is exposing them to risks that even sophisticated investors may not understand.

For myself, I will stick with boring index funds. I'm like Col. Klink in the old "Hogan's Heroes" episode, where Col.'s Klink and Hogan are trying to disarm a bomb. Hogan asks Klink which wire to cut and Klink guesses - Hogan then cuts the other wire and they survive. Hogan explains "I didn't know which wire was right, but knew you'd pick the wrong one".
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Re: “Buy and Hold No More” says A16Z

Post by livesoft »

drk wrote: Sat Apr 10, 2021 2:57 pm Disclaimers notwithstanding, the firm is talking its book: Andreesen Horowitz is an investor in many of these disruptive fintech companies that hope to fill the active trading role in individual portfolios. Oddly, it's also a lead investor in the new Long-Term Stock Exchange, which aims to enforce "long-term thinking" at the exchange level and would presumably encourage buy-and-hold (active) investing.
I came away with exactly the same opinion. I looked up the firm and its leaders. Very interesting to me because I always wonder "Why do these people work here and why do they want to do what they do?" That is, "What are their motivations?" I learned some things, but that's OT.
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Re: “Buy and Hold No More” says A16Z

Post by txhill »

I don’t know that active investing is actually going to do better in the long term, but it sure seems like it will, especially compared to anyone with a heavy bond allocation... because stocks only go up. I say that a bit facetiously but it has become true; the Fed will not let stocks go down. If economy booms and inflation rears its head, Fed will control yield curve and interest rates, and stocks go up. If we have a recession, Fed will print money, and stocks go up. I mean in terms of human productivity, last year had to have been one of the worst in recent history, but stocks went up because the money supply went up. These are crazy times unlike any other time in history.

I don’t know how long the Fed can keep this up. Surely people will start to lose trust in the value of the dollar over time. But they may be able to sustain these policies for a very very long time, in which case the active investors will crush passive investors, especially anyone with heavy bond allocations—I have felt bad and continue to feel bad for three-fund portfolio followers. Macro environment is very unfriendly to bonds and cash. I personally think heavy international allocation will suffer too for the same reasons but I could be wrong there.
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Re: “Buy and Hold No More” says A16Z

Post by firebirdparts »

Everybody’s a genius after 2020. You’d have to be a major dullard to think you can do that consistently.
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Re: “Buy and Hold No More” says A16Z

Post by TheoLeo »

I think retail traders actually did outperform the market in the last 12 months. There is this BUZZ index which tracks the 75 most popular stocks on social media and this index massively outperformed the market in the last 12 months. It is interesting to check the constituents of this index.
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Re: “Buy and Hold No More” says A16Z

Post by alluringreality »

txhill wrote: Sun Apr 11, 2021 8:27 am the Fed will not let stocks go down. If economy booms and inflation rears its head, Fed will control yield curve and interest rates, and stocks go up. If we have a recession, Fed will print money, and stocks go up.
I'm just going to note that this scenario does not appear to be in line with their mandate. Expecting stocks to go up in both inflationary and deflationary scenarios stands as entirely debatable. In a booming economy unemployment might fall, and structural deflationary events have resulted in years of stock declines historically.

"so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates."

https://www.federalreserve.gov/monetary ... 20commonly
Macro environment is very unfriendly to bonds and cash. I personally think heavy international allocation will suffer too for the same reasons but I could be wrong there.
It's difficult to say how the future might play out, so predetermined plans may make sense. Bill Bernstein suggested T-bills in February. I didn't listen to the presentation from yesterday, so I'll just presume he might have some doubts about current asset prices.
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Re: “Buy and Hold No More” says A16Z

Post by livesoft »

TheoLeo wrote: Sun Apr 11, 2021 9:14 am I think retail traders actually did outperform the market in the last 12 months. There is this BUZZ index which tracks the 75 most popular stocks on social media and this index massively outperformed the market in the last 12 months. It is interesting to check the constituents of this index.
Which came first, the BUZZ or the egg?
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nedsaid
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Re: “Buy and Hold No More” says A16Z

Post by nedsaid »

watchnerd wrote: Sat Apr 10, 2021 6:32 pm I certainly don't believe in buy and hold when it comes to TBM.

3 fund portfolio looks outdated to me given a post-QE world.

Making a good income as a lender via "safe" fixed income instruments is dead; there is simply too much money in the world now to reward risk-free capital. The 21st century will require investors to be aggressive with their capital to keep up.

And I think "retail level leverage" on the cheap in the form of specialty ETFs make improvements in Sharpe ratio and capital efficiency something more practical for individual investors to explore in ways that it simply wasn't in the past.

I believe "smart passive" and "geared passive" will continue to challenge older methods when it comes to portfolio construction.

Let the barbs fly...
If the 3 fund portfolio is outdated, what do you propose to replace it?

We have had many discussions regarding alternatives to bonds, so far the best alternative to bonds are. . .well. . .bonds. I started a thread regarding Stone Ridge Variance Risk Premium fund which was quietly closed and merged with another thread. The discussion has morphed into a discussion of all four Alternatives that Larry Swedroe recommended, only one of four have worked out. For the most part, Alternative Investments have been a disappointment for retail investors.

What do you propose to replace bonds?

You are probably correct about having to invest more aggressively but most of us older Bogleheads cannot tolerate the volatility of very stock heavy portfolios. A possible solution would be for retirees to annuitize what had been the bond portion of their portfolio and take the monthly income. Perhaps investors could choose an annuity with 2% increases in annual income. Then the remainder could be a 100% stock portfolio to deal with inflation risk.

TIPS ladders could be another solution.

The barbs won't fly from me. You had an excellent post, just asking what your proposals are to fix this?
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Re: “Buy and Hold No More” says A16Z

Post by txhill »

alluringreality wrote: Sun Apr 11, 2021 9:40 am
txhill wrote: Sun Apr 11, 2021 8:27 am the Fed will not let stocks go down. If economy booms and inflation rears its head, Fed will control yield curve and interest rates, and stocks go up. If we have a recession, Fed will print money, and stocks go up.
I'm just going to note that this scenario does not appear to be in line with their mandate. Expecting stocks to go up in both inflationary and deflationary scenarios stands as entirely debatable. In a booming economy unemployment might fall, and structural deflationary events have resulted in years of stock declines historically.

"so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates."

https://www.federalreserve.gov/monetary ... 20commonly
Macro environment is very unfriendly to bonds and cash. I personally think heavy international allocation will suffer too for the same reasons but I could be wrong there.
It's difficult to say how the future might play out, so predetermined plans may make sense. Bill Bernstein suggested T-bills in February. I didn't listen to the presentation from yesterday, so I'll just presume he might have some doubts about current asset prices.
viewtopic.php?p=5820086#p5820086
Yeah I woke up a bit cynical this Saturday morning. I don’t know what the future holds but I am not surprised that the bull market has been so unstoppable for so long given the loose monetary policy. And active picks, even meme picks, will do well in a sustained bull market.
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Re: “Buy and Hold No More” says A16Z

Post by ChinchillaWhiplash »

To add to all of this, margin amounts are hitting an all time high. Let’s borrow to buy more stocks and make more money. Then I can borrow more and keep making money :greedy . At some point, something has to give. https://www.cnbc.com/2015/04/27/what-re ... tocks.html
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Re: “Buy and Hold No More” says A16Z

Post by fwellimort »

I think we should give retail investors some credit for once.
The past few years have been quite special with brokerages like Robinhood bringing free trade --> more everyday investors have a chance to invest.

Out of my friend group, I would say like 90% of them outperformed the market in the past 3 years.
And when I say 'outperformed', I don't mean by like 1%.
I mean by like a couple hundred if not a couple thousand percent.
You can argue 'tech sector did better'. That doesn't change the fact that my friends outperformed the market. And they even far outperformed the tech sector index.

My friends out of college bought stocks like: AMD, Amazon, Google, Microsoft, Micron, Nvidia, Tesla, Nio, Zillow, Apple, JP Morgan, Visa, (and one guy with TQQQ)
[and one friend (including his brother) who bought a lot of of ethereum in 2016ish and sold at like 128x profit in 2018 December. Does that count as stocks?]
And actually, out of the co-workers I know, all of them I believe beat the market on their active publicized stock picks. They bought: AMD, Amazon, GME, CCL (at bottom of last year)

I only know 2 friends that didn't beat the market. Those 2 actually lost money trying to follow the AMD/BB hype within this past year.
Everyone else I know at least returned over a hundred and fifty percent in returns.

I myself on my fun account returned almost 400% with my active day trading since January of 2021. I have stopped actively trading because I know this entire year (and last year) was an abnormally that might not be repeated again.
GME saga was written on the wall in public forums. It was clear as day that when it was $80ish that the stock will climb higher. At least to something like $140s. When the 'short squeeze is actually real' came to first realization on WSB, a lot of WSB members realized $200~300 was possible; it is the people that came late that started dreaming of 4+ figure price.

I am not saying to go pick active. No. I am an indexer with like 97% of my money.
But I am not going to be in denial that active when it works can REALLY work. It is possible with active to get 'lucky'; those who bought call options on Gamestop/Tesla or bought Ethereum/Bitcoin could have made life changing money (in the millions) with a relatively small sum. I believe one really lucky guy on reddit made his $1k to over $1 million from GME calls. The risk/reward was something else with that stock. It's not everyday that some institutions (e.g.: hedge funds) make a mistake exposing to tens of billions of dollars to the public. It was a news worthy event because the event was just unexpected; now, for GME holders right now, I personally don't have faith even if what they are right (there's just no momentum without the media reporting about the event).

Sometimes, retail investors are just better at finding trends than professionals.
Professionals are constantly trying to 'avoid tech', 'diversify out of tech', 'the dot com bubble' even when the world for the past decade has been becoming more and more dominated by the tech industry.
It's like professionals back in the day recommending IBM when Microsoft was clearly on the rise to domination (for everyday users).
It's not like these tech companies are the same companies. Amazon is basically modern day commerce. Apple is basically modern day consumer products. etc. These companies aren't the same "tech". Under the hood is stuffs like real estate (Zillow), etc.
Maybe professionals are underperforming because they are avoiding the future to fit this idea of 'diversification' when they are just creating 'diworsification' by buying dying companies.

Anyways, for Bogleheaders, I say... just keep buying and holding the index.
Future is way too unpredictable and I believe the market will quickly price in this new group of traders that came as a result of Robinhood.
Also, there are MANY retail investors in WSB that are losing (pretty much all the new ones) money at unfathomable levels because they are now playing with leveraged vehicles they don't even understand: call/put options. The risk management of these new 'retail investors' are non-existant; one guy bought $200 Puts SPY a day before expiry which is not even physically possible because of circuit breakers. Another bought $5 Puts on GME (which is also unrealistic) while others bought $800 calls on GME after the first wave (also unrealistic).

I believe over the long run, these new 'active retail investors' will lose to the market.
There's already people who made over a million dollars and lost it all cause of the gambling addiction after the first GME squeeze.
Many retail investors after the rare GME first squeeze has lost the concept of money (it's just a 'number on the screen') and have come to believe it's easy to make money on the stock market. Unfortunately, they are going in for a rude awakening.

Anyways, don't underestimate the ability to find trends with retail investors.
I have no idea what on earth Palantir does still and don't have money there (got out at break even for Microsoft and Google) but it is definitely a company I will be carefully tracking for the years to come (at least until I can figure out whether the company is all hype or not).

As for me, my active stock picks are AMD, Microsoft, Google. All of them have been far outperforming the market (and the tech sector too) with AMD having the highest returns (166%) of the 3.
Last edited by fwellimort on Sun Apr 11, 2021 11:50 am, edited 1 time in total.
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Re: “Buy and Hold No More” says A16Z

Post by ChinchillaWhiplash »

I made some small bets on micro stocks that are up over 100% in less than a year. I did research on them. Positive earnings and growing in a high tech micro laser measuring company and non-lethal defense products with branch in GIS software for tracking COVID. (LUNA, GNSS). You can make money by individual stock picking, but it takes a lot of work and you are more likely to not win. It is a lot easier and safer to go with the cheap run of the mill index fund for the core of your holdings. And this is what I do too with 95% of my holdings. :beer
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Re: “Buy and Hold No More” says A16Z

Post by watchnerd »

nedsaid wrote: Sun Apr 11, 2021 10:31 am
If the 3 fund portfolio is outdated, what do you propose to replace it?
You can see what I use in my signature.

I'm not the only one thinking corporate bonds are not a great offset to equity risk; Swensen, Bernstein, and others have said 'take your risk on the equity side' long before current low real yields.

And at current rates, the compensation for taking that business risk is especially poorly rewarded.

And TBM has a huge hole when it comes to TIPS / inflation-linked bonds.

In addition to Short TIPS (which correlate highly with unexpected, short term inflation), my RP bond barbell is coupled to a LMP ladder of alternating 10 YR TIPS/STRIPS. STRIPS lack the inflation adjustment of TIPS, obviously, but are well suited to liability matching and have a higher liquidity than TIPS in bad markets. The cost of that optionality in terms of inflation vulnerability is not particularly high given the alternating TIPS rungs and when coupled to a decent sized equity allocation in the RP.

At the more exotic end of the spectrum, I'm in the midst of replacing a portion of the cash allocation with a small percentage allocation to a USD bull / multi-currency fund (the Bloomberg currency index is weighted by the top 10 trading partners with the USD), which not only has a little bit better yield than what I can get with MM funds, while still keeping 0 duration, but also has had high negative correlations to VT (without the increased duration risk of adding more LTT) and has improved the portfolio Sharpe ratio by a few bps.

It also tests better (CAGR, Sharpe, Sortino) than making the same allocation to low yield USD-hedged developed market government bonds (e.g. IGOV).

But that last bit of currency hedging is just MPT game-playing / icing on the cake.
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Re: “Buy and Hold No More” says A16Z

Post by dsasdg »

Buy and hold, no more
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Re: “Buy and Hold No More” says A16Z

Post by watchnerd »

ChinchillaWhiplash wrote: Sun Apr 11, 2021 10:36 am To add to all of this, margin amounts are hitting an all time high. Let’s borrow to buy more stocks and make more money. Then I can borrow more and keep making money :greedy . At some point, something has to give. https://www.cnbc.com/2015/04/27/what-re ... tocks.html
That story on margin is from 2015...
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Re: “Buy and Hold No More” says A16Z

Post by Random Musings »

Just when everyone thinks they are investing genuises, that's when the markets will tell them they're not.

RM
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Re: “Buy and Hold No More” says A16Z

Post by jeffh19 »

Some thoughts or questions

I’ve heard so,e really smart financial people say we now have zombie companies in the SP500. It seems like the companies at the very top have really outperformed everything else. Maybe I’m wrong, but google, Apple, amd, Tesla and a several others....

Are we better off in the future holding something like a growth or tech index rather than VTI? A quick look says VUG has outperformed VTI 1/3/5/10 years, down 3% YTD. That’s assuming that the smaller the company the less chance of survival through COVID/the more they were affected or are a zombie company.

But that logic also doesn’t make sense, because VTI has outperformed VOO, and small cap has been killing it. Not sure why.

Maybe the best thing would be a mostly growth etf, and then partial small cap etf?

Or am I just chasing returns?

Maybe I’m wrong but I really feel like the top 10-25 stocks will outperform for a few reasons. I’m also an idiot, which is why I just hold VTI. I have some GBTC too.
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Re: “Buy and Hold No More” says A16Z

Post by watchnerd »

jeffh19 wrote: Sun Apr 11, 2021 2:05 pm Some thoughts or questions

I’ve heard so,e really smart financial people say we now have zombie companies in the SP500. It seems like the companies at the very top have really outperformed everything else. Maybe I’m wrong, but google, Apple, amd, Tesla and a several others....

Are we better off in the future holding something like a growth or tech index rather than VTI? A quick look says VUG has outperformed VTI 1/3/5/10 years, down 3% YTD. That’s assuming that the smaller the company the less chance of survival through COVID/the more they were affected or are a zombie company.

But that logic also doesn’t make sense, because VTI has outperformed VOO, and small cap has been killing it. Not sure why.

Maybe the best thing would be a mostly growth etf, and then partial small cap etf?

Or am I just chasing returns?

Maybe I’m wrong but I really feel like the top 10-25 stocks will outperform for a few reasons. I’m also an idiot, which is why I just hold VTI. I have some GBTC too.
I'm not sure the 'lagging companies' problem is new.

I don't remember the exact stat, but something like a tiny portion of the SP500 accounts has accounted for the excess returns of stocks over multi decades.
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Re: “Buy and Hold No More” says A16Z

Post by whereskyle »

KittyCorner wrote: Sat Apr 10, 2021 2:38 pm I’m not buying it, but I’d be curious to hear this forum’s take on this A16Z blog post: https://a16z.com/2021/03/29/active-trading/

My $0.02 cents is that tech has made it easier than ever to put money in motion and that everyone’s a winner in the current market, thus the current exuberance.
I love it. The more money that keeps coming into the market, the more money for my index funds. P/E ratios be damned!
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Re: “Buy and Hold No More” says A16Z

Post by jeffh19 »

watchnerd wrote: Sun Apr 11, 2021 2:07 pm
jeffh19 wrote: Sun Apr 11, 2021 2:05 pm Some thoughts or questions

I’ve heard so,e really smart financial people say we now have zombie companies in the SP500. It seems like the companies at the very top have really outperformed everything else. Maybe I’m wrong, but google, Apple, amd, Tesla and a several others....

Are we better off in the future holding something like a growth or tech index rather than VTI? A quick look says VUG has outperformed VTI 1/3/5/10 years, down 3% YTD. That’s assuming that the smaller the company the less chance of survival through COVID/the more they were affected or are a zombie company.

But that logic also doesn’t make sense, because VTI has outperformed VOO, and small cap has been killing it. Not sure why.

Maybe the best thing would be a mostly growth etf, and then partial small cap etf?

Or am I just chasing returns?

Maybe I’m wrong but I really feel like the top 10-25 stocks will outperform for a few reasons. I’m also an idiot, which is why I just hold VTI. I have some GBTC too.
I'm not sure the 'lagging companies' problem is new.

I don't remember the exact stat, but something like a tiny portion of the SP500 accounts has accounted for the excess returns of stocks over multi decades.
I don’t just mean underperforming companies, I was specifically referring to companies basically being kept alive by the QE and struggling hardcore from the pandemic
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Re: “Buy and Hold No More” says A16Z

Post by watchnerd »

jeffh19 wrote: Sun Apr 11, 2021 2:21 pm
I don’t just mean underperforming companies, I was specifically referring to companies basically being kept alive by the QE and struggling hardcore from the pandemic
By the Fed backstopping corp bonds?

Yes, that's intent -- that it would be less economically disruptive than letting them fail under distressed economic circumstances.
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Re: “Buy and Hold No More” says A16Z

Post by jeffh19 »

I meant to add to my post above, I’m also thinking of moving international index money into VTI/VUG/BTC

Which for a noble head seems counterintuitive as US seems really over valued and vxus isn’t and hasn’t performed for crap compared to US for longer than I’ve been investing, and I don’t know if people really expect that to change maybe ever.

I have to ask myself, is this right or am I just chasing returns?
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Re: “Buy and Hold No More” says A16Z

Post by Fallible »

Definition of "Noise" from Investopedia:
In a broad analytical context, noise refers to information or activity that confuses or misrepresents genuine underlying trends.
https://www.investopedia.com/terms/n/noise.asp
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Re: “Buy and Hold No More” says A16Z

Post by nedsaid »

jeffh19 wrote: Sun Apr 11, 2021 2:29 pm I meant to add to my post above, I’m also thinking of moving international index money into VTI/VUG/BTC

Which for a noble head seems counterintuitive as US seems really over valued and vxus isn’t and hasn’t performed for crap compared to US for longer than I’ve been investing, and I don’t know if people really expect that to change maybe ever.

I have to ask myself, is this right or am I just chasing returns?
Yes, you are just chasing returns. I am so old that I remember when standard wisdom was that International Stocks had slightly higher returns than the S&P 500 over the long term with lower correlation. It seemed like a no brainer to include International Stocks in a portfolio. Now that the U.S. has outperformed International since 2009, it is a no brainer to ignore International Stocks.

Boglehead portfolios used to include TIPS and REITs. Both have been largely abandoned. Now we are abandoning International. So we are down to two. Bonds aren't doing well and U.S. Stocks are outperforming bonds, won't be long we will be down to one fund. The next prolonged bear market will bring us to Zero.

I have often joked that we are racing towards the Zero Fund Portfolio, and we will brag about stuffing our cash into mattresses. My best selling book will detail how you can diversify by stuffing your cash into three mattresses, the three mattress portfolio. What could be simpler than stuffing mattresses with cash?

Don't ignore the old principles of diversification. If everything in your portfolio is working well at the same time, it is a sign that you might not be diversified enough. The U.S. Stock Market has done well because the U.S. is regarded as a safe haven, or as I like to say it, the least dirty shirt in the laundry hamper. The U.S. Dollar has been strong since the 2008-2009 financial crisis and this has greatly contributed to the outperformance of the U.S. Stock Market relative to other nations. This condition will not continue forever.
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Re: “Buy and Hold No More” says A16Z

Post by Scott S »

txhill wrote: Sun Apr 11, 2021 8:27 am I don’t know that active investing is actually going to do better in the long term, but it sure seems like it will, especially compared to anyone with a heavy bond allocation... because stocks only go up. I say that a bit facetiously but it has become true; the Fed will not let stocks go down. If economy booms and inflation rears its head, Fed will control yield curve and interest rates, and stocks go up. If we have a recession, Fed will print money, and stocks go up. I mean in terms of human productivity, last year had to have been one of the worst in recent history, but stocks went up because the money supply went up. These are crazy times unlike any other time in history.

I don’t know how long the Fed can keep this up. Surely people will start to lose trust in the value of the dollar over time. But they may be able to sustain these policies for a very very long time, in which case the active investors will crush passive investors, especially anyone with heavy bond allocations—I have felt bad and continue to feel bad for three-fund portfolio followers. Macro environment is very unfriendly to bonds and cash. I personally think heavy international allocation will suffer too for the same reasons but I could be wrong there.
None of this post makes an argument against passive investing, just owning bonds. Or were you really just itching to complain about the Fed?
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Re: “Buy and Hold No More” says A16Z

Post by ChinchillaWhiplash »

watchnerd wrote: Sun Apr 11, 2021 1:07 pm
ChinchillaWhiplash wrote: Sun Apr 11, 2021 10:36 am To add to all of this, margin amounts are hitting an all time high. Let’s borrow to buy more stocks and make more money. Then I can borrow more and keep making money :greedy . At some point, something has to give. https://www.cnbc.com/2015/04/27/what-re ... tocks.html
That story on margin is from 2015...
Opps :oops: wrong article https://www.advisorperspectives.com/dsh ... cord-trend
And more info showing how much it has risen
https://www.finra.org/investors/learn-t ... statistics

Some takeaways: 10 yr growth of margin debt. Feb 2011 margin debt = $348,979,000,000. Feb 2021 = $813,680,000,000. It keeps going up and up. Since 1997 to Feb 2021 real margin debt has increased right at 375% and S&P 500 had real growth of just under 200%.
Last edited by ChinchillaWhiplash on Sun Apr 11, 2021 3:50 pm, edited 2 times in total.
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Re: “Buy and Hold No More” says A16Z

Post by watchnerd »

nedsaid wrote: Sun Apr 11, 2021 2:42 pm Boglehead portfolios used to include TIPS and REITs. Both have been largely abandoned. Now we are abandoning International.
In the case of REITs, I think the de-throning was appropriate, given that studies have since shown it's not a distinct asset class, but, rather, a sector of stocks.

TIPS and international haven't been abandoned by me, but maybe I'm just retro.

MLPs might be due for a comeback, although the future of the carbon economy looks to be fading.
Last edited by watchnerd on Sun Apr 11, 2021 3:14 pm, edited 1 time in total.
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Re: “Buy and Hold No More” says A16Z

Post by OohLaLa »

nedsaid wrote: Sun Apr 11, 2021 2:42 pm [...]
The next prolonged bear market will bring us to Zero.
[...]
the three mattress portfolio.
[...]
the least dirty shirt in the laundry hamper.
[...]
hahaha Thanks for the hearty laugh. :beer You should definitely publish the book. Maybe it could be a children's book: "Dirty Shirty and the 3 Money Mattresses".
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