Arabic version: مدير سابق لصندوق تحوط يدعو إلى صناديق المؤشرات واسعة النطاق

According to Cnbc, Elm Wealth founder and chief investment officer Victor Haghani said retail investors attempting to beat the market through individual stocks and complex exchange-traded funds may be better served by broad market index funds. Haghani, a founding partner at Long-Term Capital Management, discussed the issue on CNBC’s “ETF Edge.”

“I’m not sure that investors are that much more sophisticated than they were 30 years ago,” Haghani said. He pointed to human biases, particularly extrapolation bias, in which people expect recent market developments to continue. At Elm Wealth, he prioritizes cost-effective investment strategies.

Haghani said it remains difficult for non-professional individual investors to generate alpha. He argued that broad index-fund exposure can serve retail investors well, even as access to elaborate investment strategies expands. Firms including Citadel, Jane Street and Hudson River Trading have substantial technology spending, he said, creating an environment in which retail traders may face highly sophisticated counterparties.

RBC Capital Markets director of global ETF strategy Valerie Grimba offered a different perspective, saying more choice is ultimately beneficial. She said funds holding 10 to 15 stocks can offer access to investment themes without requiring investors to identify the eventual biggest winner, while derivative-based products can generate income in various ways. Still, she said investors must understand the holdings and trade-offs of any strategy they select and should be able to explain what an ETF owns.