An ETF Portfolio That Beats the Market Easily

An ETF Portfolio That Beats the Market Easily

Mar. 11, 2024

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There’s no rule that says we have to buy-and-hold.

In fact, it’s probably the worst way to trade.

But.

There are three huge arguments for buying-and-holding.

It’s not because we can’t time the market, because we can.

And it’s not because it’s the only way for investors to trade, because it’s not.

The first big argument in favor of buy/hold is the amount of time we’re able to spend.

If we can’t look at the market every day–or don’t want to–then a trading system is not a good option.

Remember, we fit our trading to our lifestyle, not the other way around.

The second argument is the barrier to entry.

To set up a Futures trading system, we need to get an account at Tradestation, learn the platform, get a rudimentary understanding of EasyLanguage coding, learn how to operate an automated system, and learn what to do in an emergency (we lose power). Forex is even harder.

That might be too much for someone.

And the third argument is the losing.

Stopouts are the worst.

Going through the setup process and then watching your first two robot trades stop out is awful.

And watching an automated system stop out for a month or two is doubly awful.

There are no stopouts with buy-and-hold.

Yes, there are drawdowns that could go on forever, but there isn’t that helplessness of watching a system take a loss.

Helplessness leads to hopelessness, which leads to quitting.

Because of those reasons, let’s say we want to buy-and-hold.

Are we doomed to simply buying an index fund like we’re berated to do by the YouTube/Financial Advice industrial complex?

No.

We can do better.

How?

It’s simple.

Pick things that go up more than the average of 500 companies. Pick things that include new, exciting companies that sometimes hit the jackpot.

Where do those things live? Live NVDA above, they live in tech (or are tech-adjacent).

Where do we find those?

In the QQQ and SMH ETFs.

But, because those really move, that might feel scary.

Let’s finish out our simple ETF trio with the financial sector. Banks are solid and dependable, right?

Well, some might argue the financial sector is risky, but by and large, banks do survive. Many have been around for many decades.

So, here’s our simple buy-and-hold ETF portfolio:

How does that do in the past ten years when compared to a Vanguard Index fund?

It destroys it.

It has a little more volatility but a lot more profit.

Index funds lose again.

We’ll look at more possibilities in the next Newsletters.

 

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Disclaimer:
It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these sites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, the publisher, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.