What’s wrong with buying and holding the SPX500?

Discussion in 'Trading' started by iamnewuser911, Nov 22, 2017.

  1. What’s the advantages, disadvantages?
     
  2. Taxes, divs, no comms, positive expected return, and guaranteed not to underperform the market.

    ...downsides are we can't prove ourselves as elite traders.

    Seems like an obvious choice to daytrade.
     
  3. tomorton

    tomorton

    If its in an uptrend, this is a good plan for trend-following, though you also need exit criteria for when the trend reverses.

    But "buy-and-hold" as strategy normally suggests no exit criteria. This is an investor's strategy, aiming to benefit from dividends as a regular and dependable income, without great concern for the equity price, as any such loss will never be crystallised.

    Which do you really mean?
     
    tommcginnis likes this.
  4. Robert Morse

    Robert Morse Sponsor

    Can you provide a specific example? Do you mean being long a SPX call or any S&P 500 index derivative.
     
    tommcginnis likes this.
  5. Hi, I mean the derivative. Instead of holding cash, you put your $ into it
     
  6. Robert Morse

    Robert Morse Sponsor

    Right, but for a proper response, it would help to know what you will do. If you are long term bullish, nothing wrong with being net long all the time with a % of your net worth. I have done that for my dad. I bought SPY for him and sold a block of stocks he held for 15 years. I don't like single stock risk unless you are going to spend and lot of time watching the names. I'm not good at stock picking. I choose SPY vs long ES because it is a IRA. If it were a taxable account, I might look at long ES futures for the 1256 contracts taxes.
     
    tommcginnis likes this.
  7. cvds16

    cvds16

    Ask yourself what can go wrong with that kind of strategy and devise an exit plan too ... The Japanese who invested in their index in the late eighties still haven't got 60% of their money back ...
     
    tommcginnis likes this.
  8. It’s spare cash actually.. since it’s going up, might as well, instead of leaving it around doing nothing, but there has been 2 major crashes, other than that, it seems solid, long term hold, on a 1:1 leverage ratio. Curious about the risks of doing this.
     
  9. I was looking at the chart of the nikkei, what happened there?
     
  10. cvds16

    cvds16

    Japan was the new economy of that time and everything would change ... investors ended up paying way too expensive PE-ratio's ... now ask yourself the question is the PE of the SP500 cheap or expensive ... might be a good way to start asking more questions
     
    #10     Nov 22, 2017