A complete roundup of social networking websites for investors

By Larry MacDonald
Globe Investor Magazine Online, February 7, 2008

Michael K. Goode is one of the hundreds of ordinary investors emerging as stock-picking stars on the growing number of social-networking websites for investors.

The St. Louis, Mo.-based psychologist spends much of his spare time managing his own portfolio and grading stocks on the Motley Fool Caps website.

Known as EverydayInvestor on the site, he has established a track record good enough to rank 15th out of 44,280 players. How has he done it? “I have gotten many of my points by shorting horrid over-the-counter stocks,” he says.

Mr. Goode’s perks go beyond the camaraderie and adulation he enjoys on the Motley Fool Caps site. His superlative performance also attracts visitors to his blog, Goode Value Investing Blog, and underpins his freelance writing for media websites.

Social investing on the Internet is exploding in popularity as highlighted by the flurry of new sites launched over the past year and a half. More than 15 now exist. With so many choices, how does an investor decide which ones to join and/or to follow for investment ideas? The following roundup may help answer that question. The main areas where the sites differ are: ease of use, appearance, and focus (virtual versus real trades, stocks versus portfolio tracking, etc). Another key differentiation is financial prizes: social investing sites are often thought as collaborative endeavours but they are also arenas for competition and making money. Actual websites are listed at the bottom of the article.

Motley Fool Caps

This site has a clean and bright interface – perhaps the most inviting of all. It also appears to have attracted a sizable following (more than 44,000 players, as noted above), which enhances the “wisdom of the crowd” (i.e. reliability of ratings). Caps members make “outperform” or “underperform” calls on stocks and their votes are tallied to produce ratings of stocks and players. Its stock-rating system gives higher weight to the opinions of top performing members. Marketocracy

Founded in 2001, this is the granddaddy. It tracks and ranks the virtual “mutual-fund” portfolios of 55,000 (and counting) members. This is a well organized site that looks like it will be around for a long time. The top 100 performing members receive (unspecified) cash awards and their portfolios are aggregated into the m100 index, which Marketocracy founder Ken Kam and his team mine for ideas to run the Marketocracy Masters 100 mutual fund.

UpDown

This one tracks and ranks the play-money portfolios of members, and taps into their collective wisdom to run an investment fund. Of note is the opportunity to earn financial rewards for 1) portfolios outperforming the S&P 500, 2) best comments, and 3) bringing in new members. Dollar amounts for prizes are not published but the winnings of top moneymakers are displayed on the site. Currently in first place is Latoyia, a trader whose 237-per-cent paper gain since Dec. 1 has earned her $3,350 (U.S.) in real money.

Predict Wall Street

Its strong suit is its ease of use. Visitors simply click on “Up” or “Down” buttons to make forecasts on stocks and indexes (a new feature takes more advanced predictions). The forecasts are then aggregated and displayed by stock, index, and forecaster. There is a weekly contest, where first place wins $300, second place $200, and third place $75.

Zacks Community

Zacks offers one juicy plum to members. The winner of the 2007 Zacks Challenge received $100,000 in the form of a one-year contract to provide advice to Zacks’ clients. In 2008, steps are being taken to expand the contest and blogging format in the direction of the Motley Fool Caps model (e.g. a user-generated stock rating system).

Covestor

This is one of the sites where words are backed with deeds: It tracks and ranks the real portfolios of members. Covestor imports data directly from members’ online brokerage accounts or lets them input trades manually with verification from account statements. Anonymity is protected through pseudonyms and reporting of holdings on a percentage basis only. The trading and commentary of top performers are available through a subscription fee, split between Covestor and the top performers.

Vestopia

This site is similar to Covestor but differs on the basis of membership and disclosure rules. The real portfolios belong to a carefully screened group of investment professionals willing to divulge their identities and dollar amounts of their portfolio holdings. Visitors to Vestopia “can look over the shoulder of an investment director” after paying a subscription fee. Non-professionals may be allowed to submit portfolios in the future.

Cake Financial

It tracks real portfolios under pseudonyms but does not charge fees to follow the top investors (this may change). There are plans to start a mutual fund based on the trading activity and portfolios of the top investors. A unique feature promoted on the site is the capacity for investors to track the performance of all their online brokerage accounts – something the brokerages don’t do.

Zecco.com and TradeKing

These are U.S. online brokers with substantial social investing sections. Members can opt to reveal their trading activity as it occurs — which provides an added dimension (words backed by action carry more weight). Trading by members is aggregated and ranked by stock; lists of top performers are also published, some of whom can be contacted.

Stockhouse.ca

A fixture in the online investment sphere, especially in Canada, it is recasting itself more along lines of a social investing site. It is adding a facility for rating Bullboard posts and bloggers so that users of the investing portal can more easily identify quality content. The focus remains on small-cap stocks, particularly those on the S&P/TSE Venture Exchange.

Wikinvest

As the name suggests, it seeks to emulate the Wikipedia formula in the investing realm. Any visitor can generate, edit, or remove content on a company or theme. The content should be much better than a discussion board because spam, errors, and vitriolic comments are amended or deleted, while quality information is kept at the top of the page.

Value Investors Club

The site is limited to 250 members and selected according to the quality of analysis displayed in an investment recommendation. The evaluator, who has chosen to remain anonymous, is an investment manager “with one of the top long-term investment records in the United States.” No doubt, the quality of the club’s discussion board is to die for. And we might also drool over the weekly award of $5,000 for best investment idea.

Others

SocialPicks, Bullpoo, and Investopedia Community have the main requirements for a social investing site but a dearth of monetary awards. SocialPicks has an interesting twist: It scours the Web and “automatically tracks the performance of notable financial bloggers, various Wall Street legends, and professional analysts,” so community members can see how they compare.

Social investing Web sites (and online addresses)

Bullpoo
Cake Financial
Covestor
Investopedia Community
Marketocracy
Motley Fool Caps
Predict Wall Street
Stockhouse
SocialPicks
The UpDown
TradeKing Community
Value Investors Club
Vestopia
Wikinvest
Zacks Community
Zecco Community

Social investing Web sites and financial rewards (in U.S. currency)

Covestor: cash for top performers
Marketocracy: cash for top 100 performers
Motley Fool Caps: contest prize of up to $5,000
Predict Wall Street: weekly competition paying $575 to top three
The UpDown: cash for beating market, comments, and referring friends Value Investor Club: $5,000 per week for best idea
Vestopia: cash for performers
Zacks: $100,000 prize for first place in annual contest