Is long-term value investing more profitable than shorter-term trading?

Discussion in 'Economics' started by learner88, Dec 29, 2017.

  1. I am sure both schools are profitable. However, I am curious statistically which school is more profitable. Value investors like to cite Warren Buffett as an example why value investing is superior. They ask "If shorter-term trading is so profitable, why are there no prominent ultra-rich traders who can compare with Warren Buffett"?

    I have been pondering over this question. Is shorter-term trading inferior to value investing mainly because it is not as scalable as value investing? What are the pros and cons of each approach?
  2. toc


    Long Term value investing allows you to keep another full time job and that makes it more profitable than day trading right away.............unless you are really piling day trading.

    Would be good if someone can post stats on raw comparison.
    helpme_please likes this.
  3. Many, many people basically fail at trading. No matter how hard they try or determined they are. -- Just browse through the trade journals and other sections of this site to confirm's nothing but people beating themselves up for various woulda, coulda, shoulda mistakes.
    They're nothing but a bunch of degenerate gamblers, if you ask me. with no real plan and/or skill.

    So statistically, for everyone as a whole collectively, "long-term value investing" is the obvious profitable option.
    But for the select few who can seem to make trading work...they usually vastly surpass the % returns of investors.

    It's kind of like aiming for the Dream, or playing it safe. If you have the skill and fortitude and character and talent...entertain the idea of playing professional sports. instead of getting a job in the workplace.
    But of course...for every Michael Jordan, Tiger Woods, Floyd Mayweather, David Beckham, Maria Sharapova...there are tons of sardines in that vast ocean of so-called talent.

    This is a retail trading forum...scalability should not be an issue of discussion. Even for the largest individual trader here...they won't cause a tidal wave most likely getting in and out of the pool or lake or ocean.
    That will only happen if you're a hedge fund manager about to buy a penny stock....stomping your foot in would cause all the aquatic life to fly out.

    Make New Year Great Again 2018
    Last edited: Dec 30, 2017
    trader99 and helpme_please like this.
  4. I agree that scalability is not an issue for retail speculators. However, for the sake of discussion, I do think scalability is indeed a good reason why the richest market participants tend to be value investors. Value investing as a money-making strategy scales better, so diminishing returns do not set in as quickly as short-term trading when AUM rises.
  5. Handle123


    I think you have thrown a wide open question and crossed several aspects of trading and/or lack of partial knowledge of Buffett. It wasn't until like last year I always thought Buffett was greatest long term trader around until MY interests of trading gone different direction. I think Buffett can be considered one of the best options sellers around to make shorter term durations while using the underlying as the hedge/capital appreciation. It is my believe he is making very more consistent returns on the options than the stocks which where the stock market keeps making higher highs could be thought as a way to limit down side.

    MHO, greatest number of wealthy commodity traders happened in late 1970s/80s was due to extremes and great movement in many commodities and the likes of Dennis, Trout, Rogers and dozens of traders became very wealthy, and cause of brokerage fees in stocks was more of a buy and hold style. But starting in 1990s, cheaper brokerage allowed guy at home, some of walls came down. Think there are more Commodity billionaires today than before because advent of Hedge funds and shows how automation can become an ATM.

    I would like to believe in my heart that "make America Great again" would and could become again. I would like to see more Buffets' of owning businesses besides those just doing hedge funds as if more companies make an effort to start more businesses, business would come back to the states again.

    I am sensing much more diversification of durations because those who are larger are making side companies for brokerage, larger hedge funds are making them. It really difficult to push in one million shares of anything at decent price and still be able to do options with the stocks, whereas owning a brokerage, can hide it more.

    In my case, short term stocks or commodities the risk is the same, so I might as well get for longer durations, but dance shorter 2-12 month duration options around my positions. I think there are much less entrepreneurs who can trade funds and be able to manage people in other companies like those of Buffet, Icahn.

    But let's face it, the number of years to get good and do it from home will be getting tougher, you can make a very decent living, doesn't matter which one you trade so long as you are consistent, what is difference if you net 200% in either one as long as you net the same. One of major problems with many of the pits closed is reduction of networking with those who might back an up and starter. It was much easier to learn spreading in the pits than at home, and spread trading was and is very consistent way to trade. You want to know where good areas to learn more about the markets? Look to see where there is absence of books written on some topics. Those who know-don't write books on it.

    Playing the game is about thinking smart, don't waste you time trying to re-invent the wheel, and when you do know how to play, you will always think "that's it"? But I spent years trying to make it harder, keep it cheap-2% risk max, long term think in terms of 15 to 1 profit to loss min and short term concentrate on low losing percentages, if you not losing often, account more likely to go up and have confidence to add more shares/contracts.
    beginner66 likes this.
  6. more profitable a coffee shop...
  7. comagnum


    In a 2011 study of behavioral patterns and resulting investment performance of more than 65,000 investors from 1991-1996, Dr. Brad Barber and Dr. Terrance Odean found the 20% least active traders outperformed the 20% most active traders by an astounding 7 percentage points a year.

    The least active group had the time to hold a full time career or run a business - this group is not glued to their screens all day.

    Buffett once said, "The stock market is designed to transfer money from the active to the patient."
    Last edited: Dec 30, 2017
    Arnie likes this.
  8. Visaria


    Huh? There are loads of them. George Soros, Stanley Druckenmiller, Ray Dalio to name but a few.
  9. tomorton


    Its important to be specific. I wouldn't have said Warren Buffett's style resembled what the majority of private long-term retail investors do, want to do or can do.

    But its also important not to be too narrowly focused. Although I'm a short-term private retail forex, indices and commodities trader, I'm also a long-term investor - in property. I've owned the houses I've lived in since the mid-80's. I wouldn't recommend anyone invest solely long-term (or solely short-term) and I'm actually doing both - I suspect most traders are also.
    comagnum likes this.
  10. Important for who?
    #10     Dec 30, 2017