Retail investors who are trying to beat the market by buying individual stocks and complex exchange-traded funds may be better off with broad market index funds, according to Elm Wealth's Victor Haghani.
"I'm not sure that investors are that much more sophisticated than they were 30 years ago," the firm's founder and chief investment officer told CNBC's "ETF Edge" this week. "We still are human beings and we're subject to certain kinds of biases — particularly extrapolation bias where whatever has happened recently in the past we tend to believe that it's going to continue into the future."
Haghani, who was a founding partner at hedge fund Long-Term Capital Management, emphasizes cost-effective investment strategies as a priority at his current firm.
"It's an environment that continues to be tough for individual non-professionals to generate alpha," he said. "[Retail investors are] just very well served by having some exposure to broader index funds overall."
According to Haghani, access to elaborate strategies doesn't necessarily provide advantages.