When I wrote about KaChing last December, the site was a fantasy stock market where you could track the pretend portfolios of other investors. But the game of make-believe is coming to an end at the company, and KaChing is now letting users attach real money to their accounts. In doing so, this company is taking on the $11.5 trillion U.S. mutual fund industry. It looks like a great opportunity, both for the investors in the company and consumer equity investors.
KaChing lets anyone create and manage a portfolio on the site, and any user can see these portfolios and track their returns. Unlike other fantasy stock-trading sites, though, with KaChing you can actually commit money to mirroring another user's portfolio. This feature should be live on the site Monday.
The site offers some protection for users choosing to track others. It awards "genius" badges to portfolio managers to only those players who have been on the site for a year, who have qualified for and signed trading regulatory documents, and whose consistent performance measures over a certain level. Only genius users can be mirrored.
KaChing's "geniuses" might be worth investing real money in.
(Credit: Screenshot by Rafe Needleman/CNET)KaChing traders also have to specify their fund or portfolio philosophy, which is tracked and rated by the system. If you say you're a health care investor, for example, and then you make a killing on Apple, your return may go up but your "sticks to strategy" rating will decline, and people following you or investing alongside your portfolio will be sent "drift alerts" to tell them that you might have moved from the "good" category into either the "lucky" or "reckless" bins. As CEO Andy Rachleff says, with a typical mutual fund, there's no way to tell if the investors are lucky or good, and especially not in between quarterly statements.
To invest alongside KaChing geniuses, you have to use fund a brokerage account at Interactive Brokers, which KaChing will do for you, online. KaChing works with this particular brokerage since it has an API that lets KaChing make fast trades fairly cheaply, at 2 cents a share.
Geniuses on the site set their own management fee, of which KaChing takes 25 percent. KaChing also will collect margins on stock trade commissions. Investors who are mirroring KaChing geniuses can stop doing so whenever they wish and trade their stocks out thereafter. Unfortunately, you can't yet trade into another genius' fund without setting up a new trading account yourself, but that should be fixed shortly. Account minimums are low, though ($3,000) and there are no exit fees.
Rachleff told me that the real secret behind KaChing is the observation that the Ivy League endowments outperform the S&P due to "a superior strategy to choosing investment managers," which is what KaChing's algorithms check for. Oversimplified, KaChing rates adherence to strategy coupled with returns, not just returns themselves. That makes returns predictable, Rachleff says.
Top KaChing genius Min Thang believes in health-care.
(Credit: Screenshot by Rafe Needleman/CNET)Of more than 8,000 KaChing users with public portfolios, only ten, so far, are geniuses whose accounts can be mirrored. Hopefully that number will rise. These ten people need competition, and users need options.
I'm one of millions of consumers dissatisfied with the returns in my mutual funds as well as the lack of transparency in these investments. I am a big fan of KaChing's model, enough so that I am strongly considering putting some of my own money into the service once there are more genius managers to track.
I have never been a big fan of fake stock markets. I don't play fantasy sports, either. I feel that if you're going to invest, nothing replaces skin in the game. A "market" with play money can't, I have always thought, provide real-world value.
But that's a superstitious conceit. Some stock games might be able to make you real money. Take KaChing, a new stock market community site officially launching Tuesday. Marc Andreessen just announced that's he's an investor in this company.
This fellow might be worth following.
In KaChing, as in other stock game sites, users can create fantasy portfolios, and other users can track them. If you're browsing users' portfolios and find one or more that you like, you can "follow" them to get notified whenever they make a trade.
What's interesting about KaChing is that the service just received SEC approval to be an investment adviser, which means that management fees for the advisers is likely not far behind.
Who are these managers? They could be anybody. KaChing makes sure they've been active on the service for at least a year so the performance you see is less likely to be a fluke. There are also tools to examine their portfolios so you can tell if a strong performer is due to a outlier lucky call or two, and if the holdings match the stated style of the manger.
Given the tragic performance of most Wall Street investment pros and advisers, I'd agree with KaChing founder Dan Carroll that it's time to open up this industry. And of the half-dozen or so stock sites I've experimented with, I found KaChing one of the easiest to comprehend for a person with some, but not a lot, of knowledge of the public markets. I like the clear filters for finding managers that let you quickly find people whose style you're comfortable with. For example, I quickly filtered out the short sellers.
It's an active community, too, thanks to a Facebook app.
I like this stock site more than most. It's clear and simple to use, and there are many portfolios on the service that are positive territory right now compared with the market in general. That's a nice ray of sunshine.
Finding fund "managers."
Inner8 is a recently launched social-stock picking service. CEO Doug Doyle says the company's mission is to provide an online alternative to the traditional investment advisor, who, he says, typically underperforms the market at large. Obviously, that's never been more true than in recent days, making Doyle's goal to, "steal share from the advice industry," quite modest. If, that is, there remains any industry to steal share from.
Inner8 is indeed a good source of investment ideas, but it's no replacement for an advisor. It's too technical and too involved. You can't just put your money in its hands and walk away. Not that you should do that with an advisor, either, but if the goal is to provide users with the same appearance of full-service management that they get with personal advisors, Inner8 is a failure.
This investor, whose investing style is a 99 percent match with mine, is only 25 percent accurate in his predictions. Maybe I need to take advice from people with different mindsets.
But it is a solid stock community, and worth exploring by anyone who is fed up with either advisors or with the current tools for selecting investments, and who realizes that they would do well to spend some time with their money if they want it to work for them.
The site has two main feature areas. First, it's a social stock site. You tell the service what your investing profile is like (though a questionnaire) and it will find other users who are similar to you. Then you can see what they're recommending. You can also have it select the users who are the most unlike you, if you're looking for a fresh perspective.
Second, it's a prediction market. But its mechanics are greatly simplified from most other prediction markets, where you wager fake money on real outcomes and where the best performers are the ones who have won most of these virtual bucks. In Inner8, you select a stock, and then, from a slider, predict the price of it one month out. The system tracks your performance and calculates your accuracy score over time. Doyle says it's a better system than the standard social stock site method of rating users' portfolios based on ROI, since those can be heavily skewed by hail-Mary investments that happen to strike it big. I agree in principle, although I do like to take advice from investors with skin in the game, and Inner8 doesn't yet connect to real portfolios at all.
Inner8 is well structured, although too technical and complex for the intended audience, in my opinion. Still, if it collects a solid community of users it will reward them with good advice. People who have money in the market have a responsibility to that money to play a more active role in its management than the advice community encourages, so Doyle struck a chord with me when he said, "It genuinely pisses us off, the good money that people are spending on financial advice. And it's not helping." To that end, Inner8 is a good service for the times.
The product will be pitched at the Finovate conference about online financial tools in New York next week. It should be a rockin' good time. A paid version with additional features (I'm predicting portfolio tracking and real-time stock data) is scheduled for 90 days from now.
There is useful and interesting data on the Inner8 stock pages.
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CNET Networks)
Trendio is a new prediction site that blends the feel of a stock market with that of fantasy football. Instead of using actual companies, Trendio places value on people or words as they show up around news sites on the Internet. Trendio users can purchase word stock using Trendillions (the site's fake currency) and manage their stocks within portfolios. Your goal as a Trendio user is to create a portfolio with words that interest you (so you can track their popularity) or that you simply think will do well on the market (so you can earn fake money).
Trendio isn't the first prediction market. The Hollywood Stock Exchange has been around several years; it lets its users keep a portfolio of actors and films whose values fluctuate based on news presence. There are also sites that use actual dollars, such as Betfair and HedgeStreet. Sites like these pull their results from a large group of media sources, although most (including Trendio) won't provide a full list.
What sets Trendio apart is that you can actually use the funds you have amassed to buy into site-sponsored contests. One of the more interesting contests was a technology competition, which challenged users to create portfolios specifically with techie words. There have also been contests about sports, business, and politics. During the contests you can view the rankings on a leaderboard and take a look at the contents of their portfolios. The top-ranked participants at the close of a contest get a prize, ranging from site prestige to actual money. These prizes are few and far between, though, leaving the spoils to those who have used the site long enough to have large accounts and thus make the biggest gains. If Trendio wanted to step it up a notch, they'd let users sell some of their Trendillions for actual cash or convert them to products and services from affiliate sites. Whether or not the casual user would want to go through such a scheme is questionable.
Trendio's newsfeed is updated live.
(Credit: CNET Networks)Browsing Trendio's categories is similar to looking at a stock site such as Yahoo Finance. There's a graph charting the day's most popular word in the past 72 hours, along with five of the biggest stories that get pulled in from Google News. There's also a live newsfeed at the bottom of the screen. In this box you can see what words are being bought or sold, along with the latest user comments in that genre of word.
Is there a point to a site like this? Potentially. If you're into the idea of fantasy sports but don't like sports themselves, there's the opportunity to test your expertise and analysis skills. As far as adding value to your day, Trendio frankly comes across as a time waster. Marketers, however, could have a field day looking at the portfolios of the site's top users. Trendio's interface is pleasing to the eyes, but I honestly question how long users will keep using a service without added incentive such as the opportunity to make real money. In the meantime, it's in a strange limbo between being fun and business that doesn't quite fit in either genre.
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