Covestor Opens Up
Yes, this is "Fred promotes the USV portfolio" day at AVC. Sorry but I can’t help myself. The launch of outside.in’s new radar service and the opening up of Covestor are two things that we have been eagerly awaiting for quite a while and they happened on the same day, yesterday.
This post is about Covestor. For those that don’t know, Covestor is a service that allows active investors to build a verifiable track record for themselves by automatically passing on all of their trades from their brokerage firm to Covestor, who then compiles the returns and related statistical information. Here’s my verified track record on Covestor.
If everyone on Covestor was like me, they would not have a business. But fortunately, not everyone is like me. There are some damn good investors on Covestor. Check out these returns and the risk profiles and sharp ratios:
So here’s what happened yesterday. Covestor opened up the doors to everyone. Until yesterday, you had to share your trades with others to be able to follow investors like this. Not any more. Now anyone who wants to get trading ideas, or just follow one or more of these investors, can do it. For free.
Go to Covestor and check it out. I think you’ll be amazed at the quality of the investors who are sharing their trades with the world.
Related links:
TechCrunch’s post on Covestor this morning
My partner Albert’s post on this news (he’s on Covestor’s board)
The Company’s post announcing the news
Comments (Archived):
Fred, I haven’t commented on your blog in a long time, but I’m always following in my Google RSS. My friend, Jeremy Stein (@stein) and I talk about you a lot, (positively).Covestor is a great resource for those not in “the know” and those “in the know”. Thanks for reminding me to go back to it. One thing i always wondered: if you’re always making money on covester, as someone who is truly in “the know”, at what point do you get so many followers that sharing your information becomes unprofitable? After all, a great investment stops being great when everyone knows it’s great. I’ve always thought that “limited resources and info 101” was a course designed to prevent public social networks from entering financial investments.The only way I could see this working well, was if “noobie” investors followed mediocre performers, who’ve been at it awhile, but really aren’t good decision makers. Please let me know if I’m way off base here.
i don’t agree that a great investment stops being great when everyone knows about it. take apple or google or oil. they have all been great investments over the past five years and everyone knows it.
Everyone knew about those investments, you’re right, and the market rush to invest in those companies inflated values even more. However, these were not cases of someone following another. These were the iPod and iPhone, Google Search Technology and YouTube, and our country’s famous thirst for oil (I wait in a coffee shop for my bike to finish getting serviced, and you debated over Bart or renting a car).I’m not arguing that a good investment can’t be public knowledge. I’m arguing that a great investment is typically the result of someone’s personal hard work, as in life’s work, and that sort of knowledge is invaluable. How else does one find a great opportunity before others? Let’s stick with Apple. Covestor attracts those that follow those that follow Apple, but Apple is really just following the person that I’m referring to, Steve Jobs. Steve Jobs created the iPod 5 years after my friend, Bill, first showed me his MP3 player, and told me it would replace our cassette players. I laughed at the time, because it was huge, but it did store over 100 songs. Bill has been right numerous times with hugely successful technologies, and I’m listening to him a lot closer now. Like Steve, they both saw the opportunity before anyone else. Now, Steve has a very high benchmark to keep pace with.I’m simply looking higher up the food chain. Investing in Apple is following. Investing in the Steve’s and Bill’s of the world, first, is my goal, but it isn’t easy. Realizing them for their potential takes incredible personal knowledge and foresight in that industry. Right?
Hi RAGZ, this is Rikki Tahta from Covestor here. We totally agree that having unique perspective can be a profitable way to invest. However we also believe that investing is not a zero-sum game and a serious person dedicating hard work and a good brain to managing money will do better than a roulette wheel. Whether you choose to understand the products of a company and see a vision or want to find your edge trolling in the 10ks and modeling industry valuation ratios – if you do the hard work for yourself you should have a way to leverage. Covestor doesn’t dictate how you should invest – we just objectively measure your performance with institutional metrics and give you the opportunity to be recognized and rewarded if your hard work merits it.
I took a few moments to look at the service but found a flaw. I use a securid FOB for my accounts. Which it doesn’t support (which is ridiculous- just allow me to press a button to enter in the current password instead of “automatically” updating on my login – other services have figured this out). The only other method to import the data is sending them PDF files of your trade statements. A ludicrously manual process that I am surprised is even being supported. And where is the validation that the PDF files I’m sending in are even from my own account?Oh well – just another financial service that hasn’t thought things through as they should of.
Hey Tim, I’m Simon Veingard, one of the founders of Covestor. As Covestor is a real-trade sharing service, it is important for us to obtain your trades close to execution so others can benefit from your investment prowess live – this is why we trigger updates of our members’ portfolios automatically without their involvement. We can support digital tokens for certain brokers – please email me directly with the name of your broker and we’ll see if we can get you set up with our automatic import.We enable smart investors to build a verified track record on Covestor regardless of their broker. Our manual upload option allows us to support these investors whether or not we support their broker today using our automated import (we are continually adding to our list of brokers supported automatically). These ‘manual’ members are periodically requested to send statements so our data team can verify their trading activity.
I think adoption will require instant gratification. I would like to see my performance record over the past few years. With Covestor, I link up an account, and then I wait patiently to begin my track record. That’s fine, but I much prefer Cake Financial’s approach of pulling in past trades to give me something to admire right from the get-go. While it may be interesting to others, the record Covestor tracks is not interesting to me. I want to see my performance based on my actual cost basis – not the random day I happened to sign up for a Covestor account.I would love detail in how these sites calculate their numbers for complicated trading histories like multiple trades in the same security, as well as the effect of dividends. I seem to get different numbers from Yahoo! Finance, Google Finance, and Cake Financial. (Because I am new, Covestor has nothing to offer me.)p.s. were the names of the two individuals on the front page inspired by Peter Lynch and Buffett?
Hi NatR – this is Rikki here from Covestor. As you know there are a number of ways to calculate performance, all perfectly reasonable depending on the intended purpose. We come from the institutional finance world, (Simon – one of our cofounders and head of Operations and Data comes out of GAM and Goldman Sachs) and we run performance statistics to measure what someone who followed you with a fixed amount of cash would have received over that same period had they invested alongside you.That is a very important differentiation of Covestor as our goal is to build a platform to allow any investor who works hard and performs well to benefit from helping others make money alongside them. I have to give huge credit to our Data team who deal with intra-day performance calculations including dividend, stock-splits, shorts and cross-overs. At the end of the day the yard-stick we measure all the formulae is: does this reflect what a third party would have achieved if they replicated the strategies.We do accept we are not the most simplistic web site and we are not unfortunately about instant gratification. Our view is that if you are serious about investing we’ll treat you like a professional and help you to leverage your hard work. But if people are going to invest real money alongside you then we’ve found communication of your outlook and decisions as you make them are the single most compelling builder of trust, and the transparency that is sadly lacking in the institutional world.
ps – Ha – good point re names on front page – probably some subconscious thing – open to suggestions for alternatives ?
Cool offering. Congrats! My only two cents is to limit any and all pink sheet or OTB stocks since these are ones that are manipulated the most. Stock promoters could light up your service as a “front running” tools. There ROi will be very high due to the churn and burn nature.
Congrats to Rikki and the covestor crew. Now it’s time to get cranking 🙂
Fred, I just saw your Covestor tweets What’s the utility? Why would you let everyone see what you’re buying and selling?
It might generate trading ideas for others, it might generate discussion about the trades that I could learn from. Its the same reason I blog and tell you all about what I am thinking about and what I am investing in
Thought so. Just wonder where the bounds of privacy are. … I was approached to log my trades in Covestor and declined — partly because I’m pretty inactive.
I test those boundries every day and I’ll let you know when I’ve gone too far
I look forward to it. Thank you.