Strength in Numbers
Marketocracy is taking its virtual investing platform into the real world by pooling user advice.
Marketocracy.com is more than a website where aspiring money managers can practice investing in stocks; the company also manages a very real and highly successful mutual fund. To make winning investment decisions, San Mateo, California-based Marketocracy examines which of its 80,000 members have the best fictional portfolios. About once a month, the top 100 are chosen as part of a paid advisory board. When an advisor makes a promising stock recommendation, Marketocracy vets the advice with all the members who have that stock in their online portfolios. While members don't play with real money, the company does. Co-founders Ken Kam, 47, and Mark Taguchi, 51, say the collective intelligence of their virtual advisory board has identified some hidden investment gems. "When that happens, I call [some of the board members] and ask, 'What is the conventional wisdom about this stock, and why is it wrong?'" says Kam.
The strategy seems to be working: The Marketocracy mutual fund has grown to $55 million under management and posted an 80 percent total return since its inception in November 2001.