It makes no sense to say that active trading is zero sum but passive trading isn't.

Either both are or none are.

Holding an asset for N days does not magically flip it from category to the other.

Yes, but a bit of no.

Yes, if the market is overall rising, then active trading should enjoy that overall rise just like buy and hold does.

But then why active trade? Because you think you can do better than passive. That part - the "doing better" part - is zero sum. In fact it's negative sum, because of transaction costs.

This assumes that all money stays in the market. Some people selling shares to active traders are pulling money out of the market to use for other purposes. Are they ‘losing’ money because they don’t get the profits from a later rise in price? Maybe, but it isnt so cut and dry.

notice you're contradicting yourself: active traders don't only trade with other active traders, they also trade with those same passive funds that bet on continuous growth in fundamentals of companies and the hope that eventually that growth will be reflected in the stock price.

then consider just how much shares passive funds move all the time due to continuous rebalancing they do due to their self-imposed mandate. (reminder: etfs hold ~$5T worth of assets.)

> Then consider just how much shares passive funds move all the time due to continuous rebalancing they do due to their self-imposed mandate.

One of the big selling points of passive, market weighted ETFs is their low turnover and high tax efficiency. Vanguard’s S&P 500 ETF (VOO) has an annual turnover of 4%, for example. That’s nothing compared to the turnover in an actively traded portfolio.

Sure they do a lot of trading volume to account for inflows and outflows from the ETF. But one of the very nice properties of market weighting is that there is hardly any rebalancing needed as individual assets drift in price.

Yes indeed, last I heard passive funds made up 50% of AUM but only 5% of trading. In other words, 95% of price discovery is still done by active managers.