From a cash flow standpoint, both are horrible as scalable strategies without cash inflows. The only way to make this work is if there is a continuous streamline of cash inflows that can support the outflows. The only way to build a steady cash inflow is by tapping into a liquid market. The liquid market has to be able to help you match the duration aka matching the inflows and outflows based on a volatility/risk-adjusted methodology measured by average time it takes to recover cash outflows. For example, if you horde a large sum of old wheat pennies, while the overall margin of old wheat Pennies when sold as collectibles might be good, it might take years to sell them all. When you perform a net present value analysis taking into account your opportunity costs, it might still look good on paper, however, you will soon realize adequate cash flow does not grow on trees.
Most people and organizations are only willing to finance you for what you are capable of paying back in reasonable increments within a time range. Hoarding can constrain cash flow while active investing frequently rack up the transaction fees. A lot of things in life take time to materialize. Frequently transactions take a lot of daily monitoring and efforts yet it might hinder one from uncovering the intrinsic future value of an asset. Active investing shouldn’t be day trading or speculation in my opinion. If there is no long-term investing value that attracted you to a certain investment, you probably shouldn’t be investing in the first place. I think both strategies do have their optimal uses but both require complementary strategies to make them work.
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Here is what I wrote previously regarding this and similar topic(s):
“Making money is all about cash flow. Think about it this way. Can you bring the money you didn’t mange to spend with you when it’s all over? Conversely, will they chase your debts when it’s all over? The perspective is important in this regard. It takes investments in something to make money. That initial capital come from somewhere hence your financial health is mostly about managing cash flows. You typically need FU money/resources before you can do whatever you want but that doesn’t mean you should tolerate exploitation just because you don’t have FU money. Starting out without FU money just means you to be smart about certain things and stay low-key. If I were you, I would try to save and invest via 401(k) as much as possible. This era is not the time to get tied down by anything. Decrease as much liabilities as possible and don’t get pressured to establish a family if you are not ready for it whether mentally, physically or financially. This is an era of rapid changes and self-preservation. We are talking about potential migration to other planets, space exploration, AI that could change our world, humanoid robotics and more. In this day of inflationary pressure and ever increasing changes, the regular person needs a way to invest their money safely and easily. Once that occurs through a 401(k) or IRA, the next step is try to find something that you are passionate about and can make money from.
You don’t have to do everything at once since you can get by with income from a regular job. Do this incrementally so eventually you will have something to fall back on. The truth is getting a job is not the hard part, it’s usually keeping a job that’s the hardest. When you are desperate, you will have no choice but to do things that sometimes are contrary to your best interests. To prevent this from happening, make sure you save enough and have an abundant and ready to use self-funded cash flow line so you can get by while you can find a new job if your current or previous job wasn’t right for you. When you have the leverage and is willing to and is able to defend yourself through legally compliant actions like quitting a job without training anyone else, you realistically just have your current or former employer the biggest FU finger. There is usually a 50-50 chance that either your boss compromises and work out how to make your work environment better for you or your boss may let you go. Either way, when you are financially able and have the necessary skills to find other employment opportunities, you really don’t need to worry at all. Even if your boss compromises, be sure to start looking for jobs anyway because you know compromising is not what bosses usually do for their subordinates eventually they will try to get what they want from you. To prevent that from happening, leave on your terms as soon as you are ready to do so.
What I learned over the years is that you will almost never be 100% right on everything. In terms of investing, you can still make money if you are 50% right all the time. At the end of the day, it’s really all about managing risks, reaping returns and managing cash flow. If you are new to the financial market or if you just want stable growth, stick with index funds that track large US indices like S&P 500 or one of those major non-index fund mutual funds offered by one of the big three US asset manager/brokerage firms. In fact, I believe everyone should have some of these as their portfolio baseline. Picking individual stocks/ETF as well as dabbling in derivatives like options and futures, OTC/Pink Sheets penny stocks and playing with margins etc should be left to the professionals. For one thing, the information gap is huge let alone knowledge and experience gap. You might not even have access to level 2 and level 3 data never mind a certain “terminal.” Heck you might not even have access or know how to do ALCO interest rate sensitivity, duration and gap analysis. You also may not know about the Money Desk to manage cash flow by matching borrowing and invest/loan while keeping a safe amount of liquidity. The US has the best and most stable financial system bar none. At a relatively low-risk return of approximately 10%+ annual returns on equity, which I personally consider it as risk-free plus and too big to fail, I am not a big fan of expend money to buy treasury/debt versus large/mega cap investments via mutual funds. All the extracurricular activities around beating the market to get an extra 5% or whatever like a blank comparing contest is meaningless for the regular person who gets maybe max $100 a year extra minus the fees that is if his or her portfolio is even large enough to participate in that fund/program and having to put up with all the potential snobby bulls*** and p****** scams. Even it reverses to the mean or way below due to aggressive tactics from these funds/programs or can’t get money out, that could create a huge issue for the regular person.”