Emphasis mine. That’s mostly true for every style of investing that doesn’t match your risk tolerance, and even those who do aren’t easy to follow through thick and thin. Buying and holding is no different: it is simple, not easy.
That being said, we all react differently, there are some who find discipline impossible, there are those who can’t even understand why emotions would have anything to do with investing at all since they have made equanimity their domain. That is why personal finance is personal and we should be wary before recommanding investing styles to complete strangers.
I see comments like these pop from time to time and I don’t understand them.
I’ve seen no Vanguard evangelism that I can tell. Sure, VT is considered the gold standard but that’s because it is a cheap, globally diversified ETF with good AUM.
If we’re getting into broadly diversified CHF hedged intermediate term bonds funds, I’ve been seen displaying Blackrock’s AGGS as taking the pot and I’ve yet to see someone argue that VAGX is better.
Regarding passively investing in cheap, broadly diversified ETFs, that’s the default because it’s the strategy that guarantees you get market returns. Deviating from that would require you to have a reason to (and there are good ones) but we don’t know who reads our messages and what their personal and financial situation is. Giving a hedge to the default means you need real determination and personal conviction in your investing style to go for it. Conviction is required to stick with any given strategy so I see it as a huge plus (take it as the “are you sure you want to delete this file?” window in old Windows OS, it doesn’t prevent you from deleting whatever you want but it tries to make you pause and ponder your decision).
That being said, I don’t see much of a backlash against other strategies than buy and hold.
@xorfish regularly touts factor investing and gets positive questions about it.
I’m openly market timing and have had no backlash to speak of about it.
@Julianek gets a lot of praise for his very insightful value investing posts.
Even the GME thread got more interest than backlash.
Cryptos, TSLA and often leverage tend to drive more aggressive comments but that’s still a far shot from “everything but “VT and chill” gets shot down without any consideration”.
I think trading on moving averages changes the risk profile of your investments without guaranteeing better returns. It should give you some comfort during big downtrends but can also kill your investments when everybody else is flat or slightly up. You have to choose your kind of disheartening and stick with it.
I don’t like following a single moving average because they keep getting in and out during flat markets, generating fees, a lot of trading and probably underperformance.
Using more than one moving average usually comes with the problem that you loose access to your signals right after entering or exiting the markets, which can be stressful and disorienting. I’ve chosen to sacrifice some upside and take on more downside in order to always have a clear signal and limit the number of times I have to trade, though some times, like these ones, tend to bring a lot of mess with them anyway.
I find that it is highly dependent on market conditions. It will outperform in some situations and underperform in others. It’s easy to backtest and get the exact best indicators for past conditions but we don’t know what the future holds so, at any point in time, we’re still exposed to a risk of winning and a risk of loosing.
I’m sure you can come up with conditions where the strategy wins but the test with the 30 days SMA on the SPY since January 1994 I’ve mentioned above gives both worse risk adjusted returns (lower Sharpe and Sortino ratios vs Buy & Hold) and a lower CAGR. It does have a lower max drawdown so it may fit some investors if that’s what they’re after.
Other strategies will have other benefits and downsides. No matter from what angle I look at it, it always seems like a game of tradeoffs to me. There is no absolute best strategy, there are strategies with different properties that may fit you if they emphasise what is important to you while their downsides don’t matter much to you. Another investor might get turned off by the downsides and find a strategy that seems awful to you most suited for their own needs.