Victor Haghani, the founder and chief investment officer of Elm Wealth, believes that despite decades of technological progress, the average person investing from home hasn’t actually become any smarter about the markets. Speaking on CNBC’s ETF Edge, the former Long-Term Capital Management partner argued that humans remain prisoners to the same psychological traps as they were thirty years ago. He pointed specifically to extrapolation bias, noting that most people mistakenly assume recent trends will simply continue indefinitely into the future.
For those attempting to outperform the market through individual stock picking or intricate ETFs, Haghani warns that the odds are heavily stacked against them. In today’s landscape, retail traders aren’t competing against other amateurs but rather against titans like Citadel and Jane Street. These firms invest billions annually into cutting edge technology and high speed infrastructure, meaning that whenever a retail investor finds what looks like a great opportunity, there is likely a sophisticated algorithm or a billionaire on the other side of the trade ready to take their money.
Because generating excess returns has become so difficult for non professionals, Haghani suggests sticking to low cost broad market index funds. While he acknowledges that these simple tools might seem less exciting than active trading, they offer a far more reliable path forward in an environment dominated by institutional giants. By avoiding the lure of complexity, everyday investors can protect themselves from the inevitable errors caused by human emotion and lack of resources.
Not everyone agrees that simplicity is the only answer, however. Valerie Grimba of RBC Capital Markets argues that increased choice provides valuable strategic options for modern portfolios. She notes that themed funds focusing on a handful of companies allow investors to bet on specific industries without needing to guess which single company will win big. While she supports using these more advanced products and derivatives for income generation, she insists that transparency is key. According to Grimba, if an investor cannot clearly explain exactly how their chosen fund works to a friend, they probably shouldn’t be owning it.