Community investing part chat room, part investment club is the latest twist in the cyber financial world. Community investors rely on their peers for shared investment advice, and their results are tracked online. Some money managers are using the sites to pick up accounts.
I use WeVest to study the strategies and stock picks of top performers, says Andrew Ho, a doctor in Beverly Hills, Calif., who trades online using the information and ideas obtained from the site.
Daniel Jones, a money manager who runs Blue Water Asset Management in Battle Creek, Mich., is an iExchange user who likes to have his research published online. It's a way for me to get some visibility for my stock picks as well as an impartial judging on the efficacy of my picks.
Jones looks for both positive and negative opinions posted by other investors. Before I make an investment for myself or anyone else, I want to see other points of view, he says. Then I can give it whatever credence it needs to be given.
Some users tout community investing sites as a means of showcasing their own investment skills. It's unbiased, says Darrel Gafford, a money manager for DNFG Investments in Shreveport, La. Working with iExchange, he invites prospects to log on to the site and check out his stock picks. I tell them to look at my performance and the rationale I use to pick certain investments.
It's worked to Gafford's advantage. By referring prospects to the Web site, he has enticed more to purchase his portfolio. I've increased my business by 25% since starting with iExchange two years ago.
Pride in Accountability
Accountability is the key component of these Web sites, say online investors. The results of your ranked and tracked performance becomes your badge of honor in the community, says iExchange user Vic Vorath, a former broker and now a business analyst in Santa Monica, Calif. Most of the participants in these community sites are here because they like to give and receive investment information and, at the same time, establish some degree of accountability.
People are tired of the chat rooms and other Web sites where they don't know who they are talking to, says Wade Ren, founder and CEO of WeVest, a community investing site. Collaborative investing leverages the collective wisdom of individual investors and provides accountability for information posted on the site.
Using an algorithm to measure each investor's long-term performance, WeVest rates performance on a one- to five-star basis, says Ren, a former computer science professor at the University of California, Berkeley. The site has a virtual group portfolio that combines picks giving more weight to ideas from top performers.
Ren calls his site a turbocharged investment club. He says it is a way to formalize what people have been doing all along bragging to co-workers, dinner companions and cocktail party guests about their great investments.
Duff Ferguson, spokesperson for San Francisco-based MetaMarkets.com, agrees. It is one more means by which people can spend time interacting with each other, trading opinions and sharing investing news, he says. Before community investing sites became available, if you wanted to talk stock with a group of people you'd have to go to a cocktail party or an investment conference.
Dallas-based iExchange takes the social aspect a step further by providing investors with a public forum whereby they can earn recognition and rewards for their ability to pick good stocks.
We track the performance of every stock pick posted to our site, says Randy Bullard, president and CEO of iExchange. Over time we track the performance of each person's picks and rank him or her against other investors.
Brokers on the Outside
So far the community investing sites seem to be the province of online investors and a few money managers. Not many brokers are joining in and some are exploring community investing incognito.
Several sites, including WeVest, don't track their users' professions. Other sites know brokers are participating, but they keep a low profile. There are full-service brokers who use iExchange for a variety of purposes, but they won't admit it since it is against the policy of their firms, says Valerie Brent, an iExchange spokesperson.
Still, most reps aren't looking for more investing information. I don't think the majority of brokers I know have the time to give it much thought, says Alan Lertzman, a retired 40-year veteran of the brokerage industry in Cupertino, Calif. Most brokers already have a full plate working with their clients and filtering through all the information that keeps coming from the firm and other analysts.
Operators say the people who frequent the sites are those already attracted to self-directed investing. These sites offer no real threat to full-service brokers, Ren says. What these sites provide is an enhancement to what online investors are already doing.
Steve Prato, an Edward Jones rep in Scotch Point, N.J., says community investing may have an appeal when the market is heading higher. I'm sure there are some clients who visit these sites and some who might be doing a small amount of online trading, but after this past year, I don't know how that will turn out for them, he says.
Prato concludes, I don't expect this new community investing idea will really impact us all that much because we're very much into face-to-face relationships with our clients.
Interested investors have their pick from several community investing sites. While some of these sites are registered with the SEC for their collaborative mutual funds, there is no obligation for individuals accessing any of these sites to do anything other than use them as a resource.
Users can share investment ideas and insights. The site also tracks and ranks stock picks submitted by both professional and novice investors.
Investors create up to 10 fictitious mutual funds with $1 million in virtual seed money and track performance over a three-year period. As a reward, the site proposes to hire its top investors to manage actual funds.
This Web-centric investment company and financial discussion community offers interactive mutual funds in real time.
A community intelligence fund is made up of member-suggested stock picks and managed by professional managers.
Individual investors have the opportunity to pool their investment knowledge with family and friends. They can have their ideas pass through a computer-run portfolio engine that creates a virtual group portfolio combining the best of their ideas.
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