[coliveira]

Until the beginning of the 20th century, stocks were viewed as a purely speculative investment. The idea that buy and hold will provide great returns is a modern one and is supported by the growth of the stock market in the 20th century.

There is also the issue of survivorship bias. The SP500 and Dow Jones indices regularly discard the losers and add new companies, so we don't know the true results of holding companies for a long period of time.

[martincmartin]

> There is also the issue of survivorship bias. The SP500 and Dow Jones indices regularly discard the losers and add new companies, so we don't know the true results of holding companies for a long period of time.

That's certainly true in marketing material of fund managers. But it's not true in honest academic papers, like this one. There's lots of data out that about total returns of the stock market, that takes into account dividends and survivorship bias.

[bagacrap]

Is there a strategy that reliably beats buy and hold? Obviously not or everyone would do it.

And no investment professional worth their salt would advise to buy individual companies to hold for the long term (almost all will go out of business or underperform eventually) so I'm not sure what purpose the survivorship bias comment serves.

[trompetenaccoun]

Everyone doesn't know how to successfully invest or there wouldn't be so many middle class and poor people. Buying and holding (a broad index tracker) seems like the best strategy for someone who doesn't know about the businesses or can't be bothered to follow the market. It's the most passive strategy.

Imo the mistake most make is they mentally compare it to themselves reading a bit online and then picking stocks based on what they feel will perform well. Of course this can only go wrong. If you're an expert in an area like the first quant traders or someone who understands startups and does angel investing, you can absolutely beat the market and people do it all the time. That's how some people get rich, you can not become truly rich by working a 9-5 office job and buying a few stocks. Unless theoretically you trade the riskiest penny stocks with leverage and magically come out on top every time like some of those WSB guys. I've yet to hear of cases where this works long term. The smartest ones know when they get lucky and stop playing, because that's pure gambling.

[bionsystem]

There are hedge funds beating markets over and over, some have been macro driven, some are equity driven, some are quant driven... Now of course it's a pareto law, only a handful out of 100 will get all the excess return and the others will stagnate or underperform indices (or even fail completely). But the same goes for building any company, most of them fail and we watch winners in awe.

[saberience]

Most hedge funds in fact DON'T beat the market though. In almost every case you would have been better to buy index funds and hold versus put your money in a hedge fund.

[bagacrap]

Correct. The true function of a hedge fund is not to beat the market over the long haul, which is generally impossible. The goal is to avoid losing huge amounts of wealth, for people who have way more money than they need. Hence the name --- you put money in there as a hedge against short term losses in equities.

[coliveira]

Most hedge funds don't beat the market, and this is widely known. Moreover, from the few that beat the market, some are involved in insider trading and other deceptive practices. From the remaining ones, a good portion can be explained by sheer luck.

[nerdponx]

I do wonder about using this same analysis to look at various funds' real returns (hedge and otherwise), in addition to the major indices in the study. I'd be curious to look at variance, downside risk during downturns, etc.

[nerdponx]

I realized that this is what https://totalrealreturns.com/ does. It seems like at least a few mutual funds do beat the market over time, e.g. FPURX: https://totalrealreturns.com/s/USDOLLAR,VTSMX,FPURX,FBGRX

[baby]

I remember reading this book pointing out that the big hedge funds that would repeatedly beating markets in the past ended up failing hard in recent years. That really nothing beats index funds.

[coliveira]

Some people will point to Warren Buffet, but he is not really a "normal" investor. Buffet only invests in a company after he talks directly to management and does a lot of analysis that is not available to normal investors. I consider him to be a legal insider trader.

[bagacrap]

I agree everyone doesn't know how to invest well. Some people even advise stock picking! :)

But the problem of some people not being rich is not simply because they can't invest well. First, obviously, not everyone can be rich. Second, most people suffer from the problem that they don't save enough, rather than that they don't invest well enough.

Yes, some people do beat the market. Obviously a lot of people are playing the lotto every day, and some win. Do they do it reliably? No. Disabuse yourself of the notion that beating the market is ever anything other than luck.

[jatins]

Momentum strategies have done better over long term[0]. Maybe someone else can contribute literature that is more trustworthy than BI

Also investing in Index is Momentum strategy disguised as buy and hold since Index will rebalance periodically to add growing companies and remove the lagging ones.

[0] https://www.businessinsider.com/momentum-trading-has-beaten-...

[kqr]

Constant fraction rebalanced beats buy and hold in the long run[1], under a wide variety of market conditions, including adversarial ones. The difficulty lies in finding (a) what fractions are appropriate for the assets you want to invest in, and (b) the appropriate rate of rebalancing, accounting for transaction costs.

[1]: I don't have citations at hand, but the papers are reproduced (among many other interesting ones!) in Theory and Practise of the Kelly Capital Growth Investment Criterion.

[bumby]

Do you happen to know where to find historical data on such holdings? For example, how do I find the historical ETF holdings at a particular point in time?

[Kon-Peki]

ETFs? Welllllll, how about mutual funds instead? A lot of ETFs are just exchange-traded mutual funds.

Mutual funds are required to periodically report their holdings:

https://www.sec.gov/edgar/sec-api-documentation

Rate limit yourself to under 10 requests per second, and put contact info into your user-agent if you'd like them to contact you about problems.

> The APIs are updated in real-time as filings are disseminated. The submissions API is updated with a typical processing delay of less than a second; the xbrl APIs are updated with a typical processing delay of under a minute. However these processing delays may be longer during peak filing times.

[bumby]

Thanks, this is useful. However, I was specifically looking for information on the SPDR ETFs.

[f5ve]

These data exist but in many cases it is expensive to obtain. Even complete historical data for the SP500 is not a trivial thing to find.

(ETF current holdings, I believe, are legally required to be published)

[baby]

Tangential but why do people always cite the DJ when it only has a dozen handpicked companies? Doesn’t sound like a great metric