It’s a double whammy. Large shares of portfolios are concentrated into fewer stocks, which trade at very risky valuations. Yet so many retail investors and professional advisers alike continue to choose index funds for equity exposure.
“Quality is a vague metric but typically includes any fundamental factor that isn’t defined as value or growth,” said Asher Rogovy, the chief investment officer of Magnifina, an SEC registered investment advisor firm.
“Every time I’ve seen a client with 12b-1 mutual funds, I’ve been able to find a lower-priced alternative with virtually identical portfolio effect,” says Rogovy.
“Financial adviser is not a regulated term. Look for representatives of an RIA firm for true fiduciary advice,” says Rogovy.
Rogovy said he’s met many investors who think that individual stock investing involves catching a meme stock or picking the next NVDA. “These are games that many investors don’t want to play,” he noted.
Rogovy says he’s seen this advice appear in many articles that even predate AI. He attributes this to certain similarities between human thought and AI — that both tend to recycle what they’ve read most often.
“To achieve 15% to 25% returns, smart investors take concentrated positions in a handful of individual stocks,” Rogovy said. “Let me be clear, this approach can bring significantly more risk. Fortunately, there are plenty of investment advisors who engage in active investment management and performance-focused investing strategies.”
Still, there are risks in relying too heavily on AI trading strategies. “So many AI models are based on patterns in text and words, but investing is a numbers game,” said Rogovy.
As Asher Rogovy, CIO of Magnifina, noted, “you don’t know if the person behind the username is a smart investor, a lonely widow, a company insider or a bored teenager.”
“Buffett’s BNSF railroad purchase was surprising at the time,” said Asher Rogovy, chief investment officer at Magnifina, LLC in New York City.
