The traditional advice is for investors to diversify and to buy and hold.
Your question about the benefits of some other strategy is legitimate and to a certain extent, one that I share. However, the way in which it is asked suggests you have always had plenty to invest and have essentially only tried one technique, or have not been successful with any others.
I started with nothing. I lost just about everything a couple of times and a majority of significant gains a few more times. As a buy and hold owner of TSLA, I also took a considerable hit in the fourth quarter, as you must have if you are also a long term holder. Of course, you held though the dip and have realized that ten-bagger, so your approach has been proven successful.. But what if TSLA had continued down or languished? You wouldn't be able to claim the same level of success.
And so you endorse the buy and hold, but what about allocation percentages? You didn't mention if all your holdings are in TSLA or if they represent only a modest, although now greater, percentage. Someone who put all their money into a superior performing stock has been much more successful than one who claims a great return on one of their holdings and not so great on all the rest.
When you don't have much, you tend to put it all on one company. If it succeeds, your gain is significant compared to those who diversify. If you sell when it is high and buy back when it drops, you can churn your gains significantly and outperform all the pros. But the reason that style is successful is because you have a small amount. When a major investor attempts to do that, it isn't quite as easy because most of the big bucks investors, and certainly any mutual fund, has a much smaller percentage in any one company so the total gains compared to someone starting out with only enough to trade one stock is less for the large investor.
Those with a lot of assets can afford to take a more conservative approach and wait for an investment to yield results. If you know a company will be profitable but don't have much to invest, you can wait a long time to realize gains. That isn't the way to get rich because a small investment that grows significantly ten years down the road isn't going to be as much as a small investment that is churned for eight years until enough is available to push into that still simmering company with potential that when it finally does pop, a really big gain is realized.
So to put this in perspective and use myself as an example, I ignored the rules for investing. I took chances and often didn't do well. That is true for a lot of people, but I didn't give up. I then started to churn the few companies I knew and that proved very successful. I was able to retire early because my 401K was grossing more than my salary. I rolled that into an IRA and had more options, but the circumstances were different and I tried various approaches that were not as successful. The one thing I did do was to overweight in a company that I believed would grow significantly. More times than not I have been successful doing that, but when one is retired, they are told to be conservative and protect what they have. I didn't do that.
I traded, but with more assets and more on the line and less time to recover, I took a slightly more conservative approach. Conservative is relative and so it was still aggressive compared to others I know.
And then I discovered TSLA and bought a sizable chunk after I put a deposit down on a model S. After it nearly tripled in value, I sold most everything else and shoved it all into TSLA. That isn't recommended, but it worked. I did sell my IRA and Roth holdings near the high because it seemed insane, especially considering the percentage of my holdings and my age, but I couldn't stay away and bought back in way too early. I took a big hit but still held on, pretty sure that this dip was orchestrated by shorts and ignorance. But I could have been wrong and selling to retain gains would not have been a bad choice.
There are lots of arguments for churning, but I needn't go into that. I will just fast forward to this year and I had made so much with the huge surge that reading about these strategies I wondered, as you do now, how it can possibly be as profitable as just holding. Timing the trades in TSLA is walking on thin ice, and I don't care to swim in freezing water. The options can easily lose value, but they can also pay off huge.
I was already 90% or better of my net worth into the stock, but figured I might as well go ahead and give it a shot with a very small investment. My trading cash available would compare to someone who was younger and had a good sized portfolio, but not enough to hold nearly as much in the stock as they could control with options.
My first attempt was just ten contracts and I saw a $3000 gain followed by a balance to the negative in the same amount. I decided when it was up about $600 I would take my money and walk. But then the stock dipped again and I decided to try again because it really seemed we were primed to pop. When the stock jumped on the 25th, I made a huge amount, yes, Teslanaire but that was because I owned so much stock. It was the recent purchase of calls, and yes, I bought a lot more contracts this time, but I was more excited about the success with that trade than the much greater amount I made in my regular stock. My option gains amounted to a 495% return in a week, and the only reason I didn't hold it to max out to 660% is because I had no way of knowing it would continue that high and I already saw how fast gains can turn into losses with even a minimum amount of stock movement. I would have been beyond greedy and stupid to hold longer. It wasn't that I had made the money so much as it opened my eyes to the possibilities. If TSLA were to pop again, I could sell stock, pocket the gains, and trade options alone for a lot less and make a tremendous amount more. It is a very viable way to go to realize good gains for those with a small amount to invest as well as those with a lot.
Trading options can be very successful, but I do it the simple way with calls, although I would consider puts. All of these other variations outlined (or detailed) by those who understand and trade that way is more than I care to learn about enough to employ. I read the posts, but that style doesn't interest me because I have enough that I don't need to do anything to squeeze even more out of this that I will never even spend. For those looking to build up their nest egg, I think that if it works for them, that is great. If it doesn't, they should abandon the tricks.
I don't know if that gives some insight into why some employ strategies that don't seem to be as profitable as buy and hold, especially when they speak about losses, but it really can work for those who can spend the time to pay attention and watch the movements. Anything that makes money in the market will take attention and it represents trading. Trading can be successful, or very successful, and certainly for some it will be a wipe-out.. Investing can also be successful. But a good trader will make more percentage-wise than a good investor. And a good investor will make more than anyone who trades unsuccessfully.
Each person has to weigh their risk tolerance. Just about everyone who has known me and discussed investing says they couldn't sleep at night or wouldn't have the balls to do what I do. That, very simply, is why they don't have the money I do. It takes dedication and nerve, but that does take a toll. If you are comfortable with what you have and what you hold, then that's all you need to be content. Others want more and take the risks. And some do it for the rush. It can be addicting, just as this board has become for some. Trading can be a successful approach to making money. I am sure you will read responses to your post that will offer their own reasons for why they choose to trade as they do. Maybe some will even tell you why buy and hold is better for them. One thing is sure; there has to be a rationale for why a trading technique is employed at all. Some do well or it wouldn't have any advocates.
. I probably should be studying more on options, but my job doesnt enable me to keep track of the market closely enough where i am comfortable with the amount of volatility. Tesla has "only" been a 4 bagger for me.
