More than a few companies have been trying to enter the social investing space in different capacities but their vastly different ideas still seem to boil down to one thing: what’s the formula for adding the tremendous power of social media into the subtle art of investing?
The two components need to complement each other instead of one overpowering the other, which could have drastic effects. Too much investment and you’re essentially competing with brokerage firms. Too much social and you’ll fall into the mundane, clichéd, follow-us-on-Twitter-like-us-on-Facebook category.
The industry right now is primed for one company to take control of the massive amount of potential that it wields.
Information at the Head
First, Wikinvest came along to lay the foundation as a “by investors for investors” platform to share knowledge about companies, concepts, commodities and currencies in a Wiki platform. This seems like the logical place to start – whenever I am about to embark on any research project I usually check out Wikipedia first.
The social aspect here is not glaringly obvious. Instead it kind of exists in the background, as anyone can contribute information. The result is a read-only wiki that provides real-time streaming quotes, all-inclusive portfolio tracking and offers customizable, interactive, embeddable, annotatable WikiCharts.
StockTwits draws in an even more real-time component with a Twitter-like platform for talking only about stocks. The hashtag is replaced with a dollar sign to mark specific companies. Instead of discussing last night’s game, you can tweet about what you’re doing with your $AAPL stock. Definitely another valuable resource.
The question then is how do we move forward? These are great sites but where does the actual investing come in?
Enter new startup Roboinvest, which is planning its launch this Monday and has removed all the noise surrounding investor analysis, leaving a focus on the investments themselves. Don’t worry, you can still “post a comment” (tweet) up to 500 characters on your activity stream.
After talking with founder Michael Giles, I think he has definitely put us one step closer to understanding the true infrastructure of such a space. A problem that more than one product in the space has tried to overcome is how to engage people who don’t know the first thing about investing but still want to get involved.
How Does Roboinvest Stack Up?
Other players include Covestor and Currensee, which have essentially pioneered the concept of “mirroring” an experienced investor, but their sites can overwhelm beginners. There are charts, investment models, approaches and cap biases.
The main idea is that you can link your account to a chosen leader whose style you agree with and put your investing on cruise control. When he performs a trade your account mirrors it with a trade of its own although with a slight lag or “drift.”
But this does nothing for someone too timid or unknowledgeable to get involved. Sure I can follow someone, he thinks, but how do I decide which one – the charts are gibberish.
Removing the Noise
Roboinvest streamlined the entire process, and beginner investors would be comfortable with the relatively few unobtrusive tabs. Instead of complicated charts to describe trading techniques and a forced social networking feel when choosing to follow a leader, the ranking system relies on an in-depth algorithm that is based on yields, trades and other indicators which results in a single number rating.
They also partnered up with normally mum E*TRADE and manage to post trades performed through their site in under a second, which is pretty impressive to watch. Then you receive an email or app notification that someone you follow just performed X trade so you can do the same thing.
There is not yet an option to link up accounts, which is a good thing. Ideally, Giles would like to add that feature in the near future so you can follow someone and see their trades or link to their account and automatically perform the same trades. This gives the follower the option to yay or nay the trade.
You pay Roboinvest with your credit card and they pass the payments to the leaders. Leaders can charge a monthly fee for the service, either $0, $29, $49 or $99, 70 percent of which goes to the leaders leaving 30 percent for Roboinvest. If they add the mirroring feature in, the pricing structure would probably have to readjust.
Roboinvest definitely thinks it has the right proportions of social versus investing, but will their streamlined design engage investors?
Perhaps the space is still too immature for any players other than the pros. Granted the average person can’t make heads or tails of Covestor’s charts or Currensee’s dealings with forex, but maybe it’s because both the space and the investors need time to mature.
Nevertheless social investing is bound to explode. With increased transparency in everything that has to do with your money, it’s just a matter of time before someone recruits all the people who are simply waiting for “the right moment” to invest. Maybe Roboinvest hit the nail on the head.
(Disclosure: Several months after the publication of this article, the parent company of MyBankTracker took a minority stake in Roboinvest.)