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In today's market, it seems that if you hold onto an investment for longer than just a few days,...

In today's market, it seems that if you hold onto an investment for longer than just a few days, you're this century's version of a value investor. The average holding period for the S&P 500 SPDR (SPY) is less than five days, and the ETF trades more than its entire capitalization each and every week. In an age where high-frequency trading dominates the market, many are beginning to wonder if the buy and hold strategy is dead.
Comments (6)
  • Herr Hansa
    , contributor
    Comments (3079) | Send Message
     
    I have no doubt that HFT and computers making mad love to each other are doing the bulk of trading. Not to pick on SPY, but the FT had a few articles over the last year noting that Delta One desks often play with SPY, including to the point of that investment having the worst delivery failure record.

     

    I don't think buy and hold is dead, and I have managed quite well with it so far. The trouble is that markets go through some serious swings. So my way around those is to look at long term trends and event driven aspects of companies. Share prices may draw jagged edged charts, but charts of revenues and earnings are much smoother. Good research can get you invested in good companies with growth prospects.
    25 Jun 2012, 07:39 PM Reply Like
  • TruffelPig
    , contributor
    Comments (4040) | Send Message
     
    I 100% agree. I do buy and hold of great companies and of speculative ones. AAPL is very rewarding :). ECYT made me very very happy.
    25 Jun 2012, 07:48 PM Reply Like
  • assetman07
    , contributor
    Comments (54) | Send Message
     
    Yeah, I think the question of thought here is all wrong.

     

    Instead of asking if buy and hold is dead in terms of investment strategy the OP should have posited where HFT investors (and I use that term loosely) are crowding out buy and hold investors in those oh-so-easy-to-trade ETF vehicles like the SPY.

     

    The reality is that HF-Trading has taken control of the volume in the market with little penalty to how long an instrument is actually held. If you think that is "good" liquidity, you're really gonna miss these guys when they decide to not take the other part of the trade.
    25 Jun 2012, 11:37 PM Reply Like
  • ocartaya
    , contributor
    Comments (2) | Send Message
     
    HFT is playing a bigger role than you all think. Take the HFT as noise obscuring the true signal for SPY or any other large security actively traded by the HFT crowd. Since they provide the bulk of the volume in SPY they also control the direction SPY takes. This is a case where the noise becomes the signal.

     

    Now, to go further, HFT is played by identifying nuances in the price action that indicates impending buying or selling. Once this nuance is identified, they just pour in trying to beat one another to the goal line. Profit and loss depend on millisecond reaction times.

     

    Now, please ask yourselves, how is this similar to the type of research and trading you all do? The answer is not at all similar. So then, since the HFT crowd controls the short term trading, what is left for all the rest of us? Simply stated the long term tradign. And how can we do this with the HFT traders controlling the price action?

     

    Well for one the HFT crowd generally does not consider value and acts in knee jerk movement by many many traders at a time that can be compared to a gestalt or mass movement. One idea may be to wait for them to beat a stock down that you do not think deserves to be beaten down and then buy it and hold tight, or to look for something soaring to the stratosphere which you do not think has the fundamental support to be there, and then short it.

     

    Just some thoughts. Have fun.
    26 Jun 2012, 12:30 AM Reply Like
  • rambler1
    , contributor
    Comments (382) | Send Message
     
    HFT trading should be dead!
    26 Jun 2012, 07:06 AM Reply Like
  • nightjoe
    , contributor
    Comments (48) | Send Message
     
    You don't want to hold through a bad year like 2008. Just trading on SPY doesn't seem like as much fun to me. I like to find a strong company and go with it. As a growth investor, I kind of snub my nose at HFT. It is more like a bad habit that I want to avoid.
    26 Jun 2012, 05:31 PM Reply Like
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