[shalmanese]

Any time you have market timing rules, you get picked off by more sophisticated investors looking for structure.

Think of it like this, imagine you had an hour to build a rock paper scissors AI going up against entire teams of people building RPS AIs for many years. If you build an AI that just returns rand() every single time, you're guaranteed to win about 1/3rd of the time, if you attempt to code anything even slightly more sophisticated, you're likely to get murdered by the other participants. You would have to build something exceedingly beyond your capabilities complex to even get back up to that 1/3rd performance figure.

Same with Passive/Active investment. Either you are 100% Passive or you have to be incredibly, incredibly Active to even match the performance of being Passive, there isn't a middle ground.

[sangnoir]

> Any time you have market timing rules, you get picked off by more sophisticated investors looking for structure.

I don't see how this is a problem - you don't have to capture all of the value, you just have to do much better than you would have by just holding the shares as the market bottoms out. Even the more sophisticated investors are small-fry when the whole market is considered.

[chewz]

I understand your reasoning but can you show any actual research supporting that binary vision of the markets?

At which point an investor's strategy is below rounding error of optimization algoritms of more sophisticated investors? Or their costs of carry?

[short_sells_poo]

To better qualify parent's post: it's not that informed investors will target a small player specifically. They most likely won't as your instinct tells you, because there is no money in it. However, the sorts of strategies and algorithms that one could feasibly implement without having been in the industry for many-many years are very unlikely to beat the buy-and-hold strategy. The "simple" stuff has been by-and-large arbitraged away.

[chewz]

> The "simple" stuff has been by-and-large arbitraged away.

Purely theoretical conclusion then is that markets had been perfectly priced ahead over all time horizones.