Posts from Covestor

Ron Lieber has a column in today's New York Times called "A Financial Plan For The Truly Fed Up" where he lists some alternatives to investing your savings with the banks and brokerages that make up Wall Street.

His roadmap is basically what the Gotham Gal and I have been doing since the aftermath of the financial market meltdown in 2008. We invested pretty heavily in the stock market as the market was melting down in 2008 and I blogged actively about that here at AVC. But we took our gains early, in the first half of 2009, and then have more or less stayed out of the stock and bond markets since then (we do use our portfolio company Covestor's service).

We are in cash, real estate, venture capital, and private investments centered around our neighborhood and city (retail, restaurants, etc). Other than cash, we are invested in things we can touch and/or impact and understand.

As Ron talks about at the start of his piece, the never ending blowups on wall street are eroding confidence in that system. It certainly has eroded our confidence in that system. So we are staying out of it for the most part.

We do have our cash at a large money center bank. Ron advises credit unions instead. We haven't made that move and I am not sure we will.

Ron also advises people to check out peer to peer lending markets and mentions our portfolio company Lending Club. I was very happy to see that Ron has come around on peer to peer lending. Our firm is a big fan of these markets, having invested in two of them and looking at others.

And he describes a movement he calls Slow Money described in this way:

“Let’s just take some of our money and invest it near where we live in things we understand, starting with food,” as the movement’s founder, Woody Tasch, puts it. He describes returns as being in the “lowish single digits,” ranging from roughly 3 percent to a few percentage points higher.

The Gotham Gal and I are big fans of this approach. We have invested in a number of busineses in our neighborhood and city with expectations properly set for the occasional loss and in general low returns on the portfolio. But we are helping folks start their own businesses and create establishments we can use and that we want to see in our neighborhood. It feels good and I think it will turn out to be as good an investment as cash in the bank. At least I hope so.

As one system seems to be failing on a regular basis, it makes sense that there are new systems that operate differently that are emerging. We are seeking to invest in the ones that can scale at USV and the Gotham Gal and I are also looking to support these efforts in our personal investing. I am optimistic about this emerging movement and I am pleased to see mainstream media starting to talk about it.

I guess this will be online learning weekend. Yesterday I talked about MBA Mondays Live and the fact that it will be available via livestream and via archive.

Today, I'd like to tell you about an online conference being put on by our portfolio company Covestor. It is called the Next Invest Conference and it takes place this tuesday and wednesday (3/20 and 3/21). The conference partners include Motley Fool, Stocktwits, Seeking Alpha, Benzinga, TedX Wall Street and many of the biggest names in online investing.

Best of all, it is free to attend. If you are into online investing, either personally or via your startup, you should check this conference out. Details are here.

The Gotham Gal and I have our assets spread across a number of asset classes and money managers and our allocations and managers have changed a fair bit over the years. We’ve seen a bunch of managers in action up close and personal.

Right now, my favorite money manager is an optical surgeon named Robert Freedland. Robert is 56 years old, he’s been managing his own investments for 42 years, and he’s been blogging and podcasting about stocks for the past seven years. I invest with Robert on Covestor (which in the spirit of full disclosure is a portfolio company of Union Square Ventures).

About a year ago, we put a modest but non-trivial amount of cash into a Covestor account. We only invest with model managers in risk tiers 1 and 2 to keep our capital at lower risk. There were about five or six model managers in those tiers at that time so I put the minimum on all of them. I would check each month and slowly I left most of the managers. But I kept putting more money with Robert. And he kept performing. Now we have close to half of our Covestor portfolio with Robert and I am thinking of giving him even more.

We are up about 11% on the money we’ve had with Robert in the past year. Since some of those funds went in a year ago, but most went in more recently, I suspect our annualized returns are closer to the 17% return he’s annualized since he started on Covestor.

I like that Robert has delivered excellent performance with an emphasis on value investing in highly liquid stocks. I like that he doesn’t short stocks and doesn’t own anything I don’t understand or recognize. I like the fact that he has a strategy and he sticks with it. And most of all, I like that he is investing his own capital as well as mine.

If you want to invest with Robert, you can. He has a $5,000 minimum and you’ll need to open a Covestor account to do it. This is not a recommendation to invest with Robert, but it is an acknowledgement that there are great investors out there who don’t work on Wall Street and that thanks to the Internet they can manage your money as well as their own money and that is a very good thing.