The end game for many social investing sites is to create their own investment management products that link member’s brokerage accounts to the trading data generated by the top portfolios on each site. Today, Covestor is the first major social investing site to launch a stock trading product. It is called Covestor Investment Management (CVIM).
Covestor had to become an SEC-registered investment adviser (like competitor kaChing did last December, although kaChing still has yet to launch an investment product). Covestor has seeded CVIM with ten of the top traders on its site, representing a variety of investment styles from growth to value to market timing. Most are amateurs, but there are a couple registered investment advisers and one accountant in there. You can see their portfolios on Covestor, but the ones they trade on CVIM are different and you get only an aggregate view of their returns and top holdings. Once you subscribe to them, you get a full detailed view.
What Covestor is actually selling is investment data. Each of the ten “portfolio managers” are trading for their own accounts. They never hold any of your money. CVIM merely links their trading data to a brokerage account you set up either with TD Ameritrade or Interactive Brokers. You select which accounts you want to follow, and CVIM automatically instructs the linked brokerage account to mimic the trades in proportional amounts. Covestor charges a management fee of about 1.5 percent of your assets being managed, or $12.50 per month (whichever is greater), which it splits with the investors being tracked. You also end up paying the fees for each trade to your brokerage (up to $17 per trade).
Covestor CEO Perry Blacher argues that at least you know exactly what you are paying and that this can turn out to be less than investing in a mutual or hedge fund:
With a mutual fund or hedge fund you absolutely pay per trade. It is another transparency issue. The mutual fund does pay commissions, they pay fees to the broker that sells stock to them it is just you don’t know how much commission they paid as it is reflected in your own performance. In other words they may have bought a stock at $11.25 but it will appear as if it were bought at $11.13. They wrap the commission into the cost of the security/securities.
In the end, nobody is going to care about the fees. It is the performance of each portfolio that matters. I’m not convinced that really good amateur investors can do any better than professional investors. Over time, they nearly all get beaten by the S&P 500. If you take a look at how each of the ten Covestor “model managers is doing, some are beating the S&P 500 this month, but none are beating it over the past three months. I’d definitely want to see some outperformance before I put any money behind these guys. But I like the fact that Covestor is leveling the playing field for smart investors to virtually manage funds and compete with the institutional establishment.
CVIM is an open platform that allow users to automatically invest alongside individual and professional investors. CVIM licenses real time trading data from investors to make models that give users information with which they can auto trade and manage their account. The CVIM console gives the user a view of their positions and performance, per model in their account, like a personal fund of funds.
Covestor is an online platform that opens up traditional money management services to a wider public by allowing its members to mirror the strategies of proven investors, trade for trade, from the comfort of their own accounts. Users can automatically match the real trades of successful investors, or can share portfolios and earn fees for the hard work they are already doing. Great Individual or professional investors join Covestor to share their investments. They either manage Investment Models (where they...
Cake Financial is a social investment service that lets people safely and securely track all their investment portfolios in one place. The service allows individual investors to track and analyze their historical performance up to ten years. Users can also view the real-time portfolios and performances of their friends, family and top investors all without disclosing net worths, shares owned, portfolio sizes, etc. Another great feature they provide users are investment “journals” or blogs that can be commented on....
Wealthfront is an online financial advisor that manages your investments for you so you can live your life. An SEC registered investment adviser, Wealthfront provides sophisticated investment advice at 75% lower fees than typical financial advisors. The company’s investors include Marc Andreessen, Jeff Jordan, DAG Ventures, and retired partners from Benchmark Capital and Kleiner, Perkins, Caufield & Byers. We’re located on Forest Avenue in Palo Alto, halfway between San Francisco and San Jose, minutes away from Caltrain.
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