Victor Haghani of Elm Wealth says retail investors trying to beat the market with individual stocks or complex ETFs may be better off in broad market index funds, as they remain subject to biases such as extrapolation bias and find it hard to generate alpha. He says firms such as Citadel, Jane Street and Hudson River Trading are minting money daily, an edge that requires about a billion dollars a year in technology spending, so retail traders are often on the other side of trades with them. RBC Capital Markets' Valerie Grimba, by contrast, sees a strategic role for sophisticated funds, such as funds holding 10 to 15 stocks that let investors access a theme, or derivative-based products that generate income. She stresses that investors need to understand the holdings and trade-offs of the strategies they choose.
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