since there are lots of trades and even small slippages on each trade can add up to counter the small net profit when all the trade results are summed up?
This is precisely why long-term (buy-and-hold) portfolio has a definite advantage in that the transaction costs are small relative to the average move, but some traders might find it difficult to sit tight through prolonged corrections, though put options are designed specifically to counter this. Optimal dynamic (short-term) asset-allocation policy is generally unattainable due to transaction costs and other market frictions(slippages), but can be approximated with just a few options in a buy-and-hold protfolio given that only a few trades are required to establish the portfolio and there are few costs to bear thereafter. An even more compelling motivation for the buy-and-hold portfolio is the presence of capital gains taxes that are generated in a dynamic asset-allocation portfolio but which are deferred until a future point in time in a buy-and-hold portfolio.
