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Comment by Waterluvian | Hacker News Reader

How likely is it that a successful model involves _sizable_ losses?

Depends on the strategy.

Venture captialists' strategy involves mostly taking sizable losses, but with enough breakout successes to still make money in the aggregate.

One. VCs structure their deals so that one breakout success is enough to return the fund. The smart ones never rely on lightning striking more than once.

Very? That's Vanguard's entire business model. Buy and hold.

Actually, Vanguard just strongly suggests that their customers do so (and provide nudges in the form of limiting sales and exchanges from certain funds to once per month). They don't get to make their customers follow a Buy and Hold strategy (and their ETF products have no restrictions), so I think it's more accurate to say that they do better (for their customers) due to their relentless push towards efficiency, with low turnover being an important part.

I feel like that's splitting hairs a bit. Sure, they can't prevent you from panic-selling or attempting to time the market, but their low expense ratios are possible because they, themselves don't do it. They just follow along with the markets.

They've got some pretty good arguments in favor of this, too: https://vanguardblog.com/2016/10/13/when-nothing-is-somethin...

I disagree. Since so much of their business is in their passive index funds, they/the fund managers, don't get to choose. Instead, they do their best to encourage and incent a set of customers towards low turnover.

They do a great job with VTI and their other funds to attempt to minimize the requirement of actually selling assets when liquidation requests come in, but that's not the same as saying that they, Vanguard (and more accurately the fund managers), practice a "Buy and Hold" strategy. Tracking an index well actually requires lots of buying and selling!

There's a distinction to be made between permanent losses and market driven / unbooked losses. If the original investment thesis stands, ignoring day to day market changes is perfectly reasonable.

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