The problem with ranking
Today the stock picking site Kaching announced that they have become an SEC registered investment adviser. I believe other stock picking sites like CoVeststor have done or will do the same. Becoming a registered investment adviser points into the direction social investment communities are heading: Taking on the Mutual Fund industry. We will provide as well alternatives to the Mutual Fund industry who is bloated, too expensive and performs mostly worse than the market does. However I do not believe stock picking is the right way to do that. I repost a comment to stock picking I left on Techcrunch:
“‘Of the 350,000 portfolios on kaChing, 1,500 have actually generated positive returns…’ The problem with ranking is, that it does not contain positive information value. When you rank, you always get winners - question is whether this is luck or skill. Not the performance but the risk adjusted performance of a portfolio is relevant. All these ‘winner portfolios’ have huge Beta’s. Another problem with ranking fantasy portfolios: What if a user generates two portfolios, one bullish another bearish. One of the strategies will win but this does not mean that the owner of the portfolio is a good stock picker. Having said that, I believe social investments and taking on Mutual Funds is very interesting. But there are problems attached on how to identify long term winning strategies.”
I believe following arbitrary stock picks is not providing real value to individual investors. It the strategy, the systematic investment that creates long term winning investors. That is what we are focusing on with Strateer.