You're right, Buy and Hold is a terrible strategy. Look how poor Warren Buffet is as a result of holding. /sarcasm

Not having capital isn't the same as being unsophisticated. I could do all the right research on which stock I want to buy, but if I only have $100 to invest at the end of every month $10 fees would dig into my earnings very quickly.

Assuming that people without large amounts to invest are stupid says more about you than it does them.

EDIT: you also don't need to spend $100 for 20 years of stock data. Plenty of services, such as Quantiacs/Quantopian/QuantConnect allow you to test your strategy against historical data for free.

That's not entirely fair. It is disingenuous to characterize Warren Buffett's methodology as "buy and hold." Berkshire Hathaway takes far more active participation in the companies it's long on than any individual retail investor could hope to imitate (or even fathom, logistically speaking). It's not just a matter of being long on a company and buying the stock - the amount of capital they invest provides Buffett et al with involvement and corporate direction that few other institutions can command, let alone individuals.

I agree with your point that buy and hold can be a valid strategy, I just don't think that example is fair and Buffett it basically a meme in these threads now.

I think you may have misinterpreted the OP's point about sophistication - I don't think he was trying to be condescending to those with comparatively little to trade with. His actual point is valid - if you are optimizing for commissions first and foremost, you're probably doing something wrong (as an active trader). Robinhood is a platform that, by design and mission, differentiates itself on the lack of commissions, not on superlative features or strategy availability. This means that if you choose Robinhood as your platform for trading (as opposed to, say, Interactive Brokers), you're likely optimizing on commission/fee avoidance, because that's all they're really got to offer that's unique.

Commission and fee avoidance is great, sure, but optimize for that within the context of a larger strategy. It's very important to reduce fees because it can make an otherwise unprofitable strategy profitable, I agree! But you should really start by getting to the actual strategy first, and Robinhood's business directive might encourage potential investors to prematurely optimize on fees, when that is honestly not the thing that typically prevents people from being successful in the market. The thing that typically prevents people from doing well is the lack of real alpha.

If you do have a viable trading strategy with a good Sharpe ratio, the commissions will not stop you from being successful. Conversely (as one example), if you are using the commission-free trading as a way to explore strategies that you think are viable, but which are actually just risk-overloaded returns attributable to chance in disguise, then yes the commissions will eat you alive - but that's because you don't really have a working strategy in place.

I would NEVER EVER put my successful investing or trading strategy in the cloud or in the hands of a third party company, especially if they are in the same space, e.g. competing with me on the stock exchange...

> Not having capital isn't the same as being unsophisticated.

Except in the regulatory framework we live in worldwide.

Your 4th paragraph contains a rather bold claim. You give one counter example to buy and hold strategy being good. I imagine no one really thinks buy and hold means to never sell under any circumstance. It seems to me to be more of a philosophy that buying/selling on emotion can be dangerous.

The second to last paragraph seems to me to be quite dangerous. I'd wager it is quite likely a person would see a pattern that really isn't there.

As in anything in life you need to have a strategy, even if you invest only in SPY ETF you still have to have a plan when to buy and when to sell. One interesting idea to start is to look into different trend following strategies. Get the data and back test different scenarios and see what is going to work for you according to your risk management, what draw downs you can tolerate, etc...

Buy and hold indefinitely is a completely valid strategy, and outperforms almost all active investment strategies in the long term.

Especially with somewhat-diversified assets like SPYders or index funds.

At least, it's worked reasonably well for me for the last 20 years.

Buy and hold will work until it doesn't and a lot of people will be left holding the bag, especially if you need the money at the bottom for medical, retirement, etc... Just check the Japan’s Nikkei stock index, almost 30 years later people are still waiting and are far far away from the top...

So what you're saying is that if the market starts behaving significantly different than it has throughout history, people will be screwed. How exactly does backtesting help you in this scenario? By definition, basing a strategy off a good backtest is assuming that the market will behave similarly in the future as it has in the past.

And what does it look like as total returns or Dividends reinvested?

If you are committing to buy-and-hold you are committing to buying a diversified portfolio.

No one advocating buy-and-hold recommends buying one thing.

If you back tested and you re confident in your analysis, more power to you! I am yet to find a truly diversified portfolio that can generate good returns for me...

My back tests and analysis are showing that I am not OK with buy and hold, because I don't want to stomach 50% draw downs or to wait 15 years for the NASDAQ to bounce back...

I am not that risk tolerant and I might need to sell some of my investments for medical, travel, even early retirement...

That's why I like to buy when the market goes up and sell when it goes down and be cash during crises like the dot com bubble and 2008 financial crisis... you can always buy them back on the way up when the trend changes...

Well, yeah. If you are not risk tolerant you shouldn't be investing in the stock market.

No Sir, you should invest in the stock market according to your own risk tolerance! For me it works perfectly and I am very happy with my own strategy ;-)

The description of your strategy (which sounds identical to momentum trading) is a quintessential very-high-risk-picking-up-pennies-in-front-of-the-steamroller approach.

You described it two posts up. Buying on upswings selling on downswings.

I don't see how Robinhood is any more dangerous than the others. They offer the same products as regulated by the financial industry. Companies advertise all the time with x amount of trades a month/year at low or $0 cost. You can't just go in an day trade because there are restrictions and regulations on everything just as any other brokerage firm.

Wow, what a ignorant comment. You buy order would have to be in excess of $1000 for a transaction cost of $10 to be insignificant. As for the buy and hold remark, read the literature.

You need capital to do any meaningful investing, at a minimum 5 digits account, money make money, this is the simple truth...

Everything else is smoke and mirrors and unicorns...

There is no way you can turn $1000 into anything significant without insider trading information...

You're getting downvoted but what you said is the truth.

All of this marketing around the miracle of investing small amounts (if you invested $100 into the market 20 years ago it'd be worth $1M today!) is just that, marketing. It's a way for brokerages and mutual fund salesmen to get more people into the game.

The brutal reality is that you need at LEAST $10K to ever see an appreciable return from the market. Investing $500 is a waste of your time unless you go into it with the understanding that:

A) You might make $50 a year from it

B) You're going to make an effort to actually learn about the stock market, fundamental analysis, etc with the aim of better knowing what you're doing when you have a bigger bankroll to invest.

I agree with the thrust of your argument, but I'm confused with regards to ebay. I took a casual look and, yes, found listings of "financial data" (among lots of buzzy keywords) for <$100. But the quality and origin of the data looks...dubious at best.

Do you have personal experience buying data from ebay? Why would you do that?

I got it from this seller and at the time it was $99.

http://www.ebay.com/usr/artinvest389

I did test random samples from the data against other data providers and I am using it every day an yet to find errors or mistakes...

"Stock Symbol, Date, Open, High, Low, Close, Volume"

Sounds like fun for those that like technical analysis.

You'll also need earnings and balance sheet information, which this doesn’t have. It's available, but if you're going to grub that out,...

Buying on eBay 20 years of data for $100 is a very good risk / reward for me, no offense, but data is cheap, $100 is one dinner out for me... even if the data was crap it is much better than to spend few thousands dollars for data from another unknown provider from the web with crappy result...

Nobody asked about your income or whether the data was worth $100 or not. OP said he couldn't find good data on eBay and asked for clarity

Your comment is very perplexing in content and tone.

Sorry if I came out this way, but this is my honest answer - the data is cheap... being a lazy person, for me everything is a risk/reward... $100 to back test any trading strategy I can imagine up to 20 years back is the best risk / reward, much much, better than to go and start trading "for free" on a fancy app on a $500 phone with a "small account" I can "afford" to loose...

I guess the reason why it seems confusing is because if you're prioritizing risk/reward tradeoffs and saying that spending the money for good data is worth it to you, why not license the data from a reputable source?

That said, I think I might not have conveyed my original question well enough - what I actually meant was 1) is the data accurate? (you sort of answered this by saying you compare it to presumably licensed sources) and 2) what actually led you to searching for financial data on ebay? (you didn't answer this, other than "it's cheap").

I'm basically wondering how you did the mental calculus that concluded ebay was a good place to check before you verified the data was alright.

I use Robinhood with a small amount of money that I am 100% ok losing. I hold a small number of tech stocks to keep me invested in their movements. Some of them have turned out better (nvidia) than others (twitter). But it does help me follow the news from those companies a little better.

Agreed that owning stocks will keep you more engaged with what is happening in the business world, but you'll need super human discipline to not act on the news. Wells Fargo, for example, is now trading at an all time high despite being involved in recent massive consumer fraud.

What you just said introduces a bit of a conflict with your claim that strategy is important. Sometimes you need to take calculated risks (i.e. always be reasonable, don't lose all of your assets, don't get addicted) and 'lose' money to learn how to make more money.

I think it is very noble of you to weigh your needs against the needs of others. Charity and how you should exercise it is a very interesting subject, and there are many many ways to do it optimally. See Givewell, Watsi, Mindsmatter etc. Since you are reading this, I assume you are doing reasonably well in life, so, and this is my personal view btw, you do need to give something back to those in need. However, don't let that prevent you from investing in your own education - it will very likely enable you to do more.

Yep, let me clarify, it is never OK to loose money due stupidity, not knowing what you are doing, praying the market will turn around, etc. If you have a proper risk management and investing strategy, yes, you will have many periods and trades where you are going to loose money short term, but you'll be confident that you'll make the money back + more, because you did back test everything and you have the proof your strategy works...

I'd only use Robinhood to buy cheap index ETFs. 99% of people should not be buying individual stocks.