eToro describe themselves as a social trading platform, and there are some merits to their platform and social innovations. However, as you’ll see in their promotional video, they market themselves in a way that suggests that you can follow another investor and make money without the time and attention of traditional investments.
The main flaw in this argument is that you are transferring the choice and the risk of your investment decision from individual stocks or indices to which trader/investor you choose to follow. You may look at the past performance of a trader, but this is no different than looking at the historical chart of an individual stock and deciding because it went up in the past it’s going to continue to go up in the future. Another parallel is the choice of which mutual fund or fund manager you choose to handle your money for you. As they are so quick to remind us:
Past performance is not a reliable indicator of future performance.
