Buy & Hold - S&P

Most? Could you elaborate?

I'm assuming you mean the S&P 500. The SPY ETF is a close follower of the S&P 500 and one of the easiest ways for the casual investor to gain exposure to the S&P 500. The SPY had a compound annual growth rate of 7.67% for the last 10 years (dividends reinvested). I agree that when volatility is brought into consideration, it is quite far from optimal investing. :)
 
realbigdreamer said:
Most? Could you elaborate?
Click to expand...

When I say most believe, I mean the general public, and pretty much every talking head and magazine,
keep punting that one should buy and hold. If you look at the results (with S&P as an example)
you went through a 55% drawdown to get a 5% annual return.

So your 7.6% seems right if you re-invested dividends (as the 5% is only capital)....
so an 8% return per annum on something
that goes through a 55% drawdown every 7 years...thats a terrible system.

To lose more than half of your account to make 8%
Especially when corporate bonds pay 8% with almost no risk.
 
Unless you can demonstrate that you have an algorithm that is simple and requires very little investment of time that does significantly better than the index returns I don't see your point? Especially after taking into account the trading costs and tax implications of mechanical trading...

Also corporate bonds definitely don't have "almost no risk" especially those in the US (seeing as we are talking about the S&P) that are returning 8% per annum...
 
You mean like the 7x13 system that produced 80% return last year
...the one on my site that Ive posted for more than 2 years?
Or you mean like the Solanum system that has had similar results over the past 5 years.

As far as the corporate bonds go youd have to be a bit more specific,
I cant think of any major companies that have defaulted in the US or here in recent years.

Edit: Correction, ABIL is the only 1 I can think of
 
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Not going to register on your site just to read about the algorithm. What I am curious about is whether your return calcs take into account the additional transaction costs (including having to cross the bid-offer spread) as well as the much larger tax implication of income vs. capital gains tax? Also you can't compare buy-and-hold in the US with automated trading in SA...

Seeing as you are using the S&P 500 as the reference, lets focus on US bonds that are yielding 8%. Those are 20 year BB to B rated bonds which have a cumulative 20 year default probabilities of between 20% and 35% which is definitely not "almost no risk" (they have 3 year default frequencies of between about 5% and 13%).

As for recent defaults: Ford (2009), Kodak (2012), RadioShack (2015), Colt Defence (2015) are what I could come up with in 5 minutes of Googling. None of which are tiny companies...
 
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Jehosefat said:
What I am curious about is whether your return calcs take into account the additional transaction costs (including having to cross the bid-offer spread) as well as the much larger tax implication of income vs. capital gains tax? Also you can't compare buy-and-hold in the US with automated trading in SA...
Click to expand...

...:confused:

Its an ALSI contract, its R14 in and R14 out. Thats R28 on 370 trades a year, so thats 8900points - 3*370 = 1100p
Net result = 7800points or R 78000 per contract after costs.

Depending on your tax bracket, say its 40%...considering a person has rebates and deductions,
Ill give you the 40%, however the trading costs are deductible, because lets look at worst case scenario.
Tax = approx R 30,000 worst case.

So a net return 4800 points after costs and taxes per contract or R 48000.

which is still a 40% return for the year.

Buy and Hold last year...the ALSI did -1%

I think that you forget that tax is a function of profit,
as in your tax cannot be greater than your profit...
so if you make 12% its just 40% of 12%, or if you make 0% its just 40% of 0%

I would really rather be making profits and getting taxed
than sitting without tax but having a -1% return


---------------

As for the second part

Jehosefat said:
As for recent defaults: Ford (2009), Kodak (2012), RadioShack (2015), Colt Defence (2015) are what I could come up with in 5 minutes of Googling. None of which are tiny companies...
Click to expand...

Recent defaults and the 1st one is in 2009?
 
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Please don't get me wrong, I'm not suggesting that there is no value in automated trading. I'm just saying that when you are trying to compare returns across different strategies with different costs associated with them you have to look the net returns of each approach.

Do you not pay STT or broker fees etc.?

I only listed Ford because I was surprised that such a big company had defaulted.
 
I agree with you that everything comes down to different strategies,
and I thought it was a good question to ask for taxes and costs because
I have seen how these can kill a strategy

Re the costs: Futures are the cheapest instrument in the world,
R14 includes brokerage, VAT and all JSE cost - In america its about $1 to buy a future.

What most people dont realize is that - yes the software packages are great, yes its cheap.
but YES ITS extremely dangerous. Futures are the fastest way to lose money as well
if you dont know what your doing.


Here are my views on Buy & Hold.
Im slightly against it, my reasoning is simply that your strategy on the market is incomplete
because when things dont go well you have no plan...the plan is Hold and Hope.
[You dont have to register to read, link is open to all]

http://www.myshares.co.za/basic/blogs_view.php?p=10
 
...deleted duplicate post...
 
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