Executive summary
Luke, a fellow popular investor, made a fair point under Thursday’s eToro post: many people want to invest without second-guessing which shares will beat the market. Our earlier framing overstated the case against diversification.
A broad index fund is a legitimate way to reduce the work involved in investing. Copying an investor offers a different division of labour: another person researches and implements portfolio decisions, while the copier assesses the investor, the strategy and its risks. The potential benefit is less duplicated work. The responsibility for deciding whom to trust and whether the approach fits remains with the copier.
Indexing is a reasonable alternative
An index fund follows a basket of securities, usually with less research and trading than an active approach. Expenses and market risk remain, but the investor does not need to select an active stock-picker.
SPY tracks the S&P 500 and QQQ tracks the Nasdaq-100. Choosing the index therefore also means choosing the basket of securities. That choice still deserves thought, but it is a different task from assessing the judgement of a person selecting individual holdings.
eToro’s Popular Investor programme offers another way to organise the work. Its value needs to be explained in terms of what can be delegated, what becomes more visible and what the copier still needs to assess.
Research can be shared; judgement still needs testing
Public filings may be available to everyone, but time and ability to interpret them differ. Delegation lets one investor’s work inform many portfolios, reducing duplicated effort.
Consider a hypothetical chip supplier with rising orders. Expanding factories can still consume cash, while delayed customer spending can postpone receipts. An investor must connect demand, cash generation and the price paid for the shares. Even an accurate business forecast can produce a poor investment if the share price already assumes something better.
CopyTrader carries portfolio decisions into proportional allocations and subsequent trades. That can reduce both the research and implementation a copier must repeat. Reading an investment argument and putting it into practice are separate pieces of work; copying can transfer more of the second to an existing process.
Information asymmetry remains: the copier cannot fully observe the quality of the research behind those decisions. Selecting a researcher becomes an investment decision of its own. A detailed explanation can help us judge the reasoning, but it cannot remove uncertainty about the assumptions we have not seen or the outcomes still ahead.
Visibility helps, but incentives still matter
Holdings, performance records and explanations provide evidence to assess. They cannot reveal every assumption or establish future skill. A strong return could reflect favourable market exposure rather than repeatable judgement.
Shared exposure helps: the copied investor also buys assets with their own money. But eToro funds payments for eligible programme participants linked to assets under copy. That rewards attracting and retaining capital too. The investor’s income and tolerance for losses can differ from the copier’s. Alignment is partial.
Costs also need a precise description. CopyTrader has no additional feature charge, but applicable spreads, transaction charges and other account or asset costs can still apply. Entry timing and execution can also cause copier returns to differ from the investor’s.
Three questions test the process
Before copying, we would ask three questions.
Process: What supports the thesis, and what evidence would change the investor’s mind? A useful explanation should make the reasoning clear enough to examine, rather than asking the reader to rely on conviction alone.
Exposure: Which holdings depend on the same spending cycle? If a portfolio held ASML, TSMC and NVIDIA, we would examine each company’s sensitivity to that cycle before treating them as separate sources of risk. The question for a copier is whether they could tolerate those holdings falling together.
Accountability: Do explanations address losses as clearly as gains, and do later decisions follow the stated approach? The record of decisions matters alongside the story told about them.
These checks reduce how much must be taken on trust. They do not prove that an investor will outperform. Programme membership itself does not establish expertise, and a strategy can change.
Delegation changes the work rather than removing it
Monitoring still takes time. The questions about process, exposure and accountability need to be revisited when holdings, strategy or personal circumstances change. If we cannot assess the investor, copying has not resolved the original problem. A broad index fund remains a reasonable alternative.
We see the programme’s strongest use case in investors who can assess a strategy and its risks, but lack the time to research and implement every position themselves. Clear explanations, visible risks and an honest account of setbacks help make that assessment possible.
Readers can review Razvan Ceapa’s eToro Popular Investor profile, razvancd, with those tests in mind.
Copy Trading is not investment advice | Capital at risk | Past performance does not guarantee future results