Who are the top marketers in online finance?

The real story behind growth of online finance companies is that growing true Internet investment firms has moved from an exercise in mass-market brand building to true Internet marketing — including building sales funnels, conversion, and monetization.

So, who do you think are some of the most talented marketers in finance? I’ve put a few down in the list below.

Feel free to vote . Who else belongs on this list?

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How to create a hedge fund portfolio that beats the market (checklist)

In Tradestream your Way to Profits, I wrote about how smart investors can use hedge fund filings to create a wining portfolio. By tracking the holding information of some of the most successful investors on the planet, individual investors can piggyback on hedge fund returns.

Many in the media — including some people I believe are smart, intelligent investors — poke holes in these replication strategies.  I’m not sure of their motivations, but the data are clear: By methodically creating a portfolio that seeks to mimic specific hedge funds (not all are good candidates for replication), individual investors get a big piece of the returns many of these funds have generated for years. Here’s a webinar I hosed last year on the subject of cloning hedge funds.

My ‘hedge fund’ portfolio

I’ve been developing a Tradestreaming.com Guru Portfolio this for the past couple of years (testing for 1 and using it with client funds for 2). While the S&P 500 was essentially flat last year, my Guru Portfolio generated close to 6% before fees. Even more impressive, it’s up close to 190.3% over the past 3 years with a 13.4% drawdown.

AlphaClone has been indispensable to building this portfolio (that image is from AlphaClone). I wrote about how AlphaClone is the cure to investor insanity in 2009 and I still believe it’s a very important tool for all investors to build tested, defined strategies that build on the research done at the world’s top hedge funds.

The point here though is that just buying a stock willynilly that Carl Icahn is targeting on a buyout or that Warren Buffett just put $1B into, isn’t really a strategy. For hedge fund replication to really work, you need to spend the time understanding how certain funds can best be piggybacked.

There needs to be a method to the strategy for this to really work — one that removes and individual’s decision making (ah, I like this stock OR, nah, I wouldn’t buy that — it’s a dog!) throughout the process. I found this to be the hardest part of implementing this quasi-quantitative strategy.

How to build a custom piggybacked hedge fund portfolio

There are simpler strategies on AlphaClone that are just plug-and-play, no research needed. You can see 6 different ways people are tracking hedge funds which don’t require a ton of work. Some of these work amazingly well, but I personally wanted something customized to some of the things I’m working on at Tradestreaming.

Here’s how I built my Tradestreaming Guru portfolio and how you can begin doing it in just under 1 hour with AlphaClone.

1. Understand how funds can be tracked: Some funds are hard to replicate. From what I’ve seen the best funds to piggyback hold positions for at least a few months at a time, have a value approach, and don’t have a problem taking big swings on individual stocks (meaning, have a sizeable % of their assets in individual names).

*Important point: Sometimes (and AC helps here, too), it’s not an individual fund’s picks that are the most exciting. Instead, it’s the most popular stocks held by a family of funds (say, the Tiger Cubs). Or, the most popular (that’s its technical name) stock in a certain industry or market cap held by all hedge funds (say, technology or transportation).

Here’s a list of the most tracked funds on AC to get you started (though AlphaClone literally tracks thousands of funds):

alphaclone

2. Determine what your ideal portfolio looks like:  If you look at the list above, these funds perform pretty damn well (at least at the 3Y mark), but their clones are portfolios comprised of the funds’ top 10 holdings. If you tracked a handful of these funds, you’ll end up with a pretty large portfolio of individual stocks.

Before you begin, it’s important to envision what type of portfolio you want:

  • Do you want to design a portfolio of 100 positions or 10? 
  • Are you comfortable following picks from just one hedge fund or do you want more diversity?

I personally didn’t want a portfolio larger than 10-15 stocks (read below).

3. Determine which strategy will get you to your ideal portfolio: When you play around on AC, you’ll see that certain funds are best replicated by a strategy that buys their top 10 holdings. Others work better by just following the top holding. Still, some follow the newest holding.

I wanted an easy-to-manage portfolio of  about 10 stocks (to get diversity and focus on different sectors) and I didn’t want a portfolio of 100 stocks (10*10). Instead, I targeted funds that worked well by just buying their top or newest holding. If I’m following 10 funds, that would leave me with a 10 stock portfolio (1 stock from each fund).

4. Screen, screen, screen

I used AC to screen for funds that:

  • performed well
  • had high Sharpe ratios
  • lower drawdowns
  • I looked for returns over 3 to 5 years
  • and that replicated well by using a single stock pick to represent their returns

I was also looking for funds that had focuses on different sectors (like biotech or tech or small caps, for example).

5. Add these funds to a Fund Group

As you find the funds that fit your strategy, add them to what AC calls a Fund Group.

Once you’re logged in to AlphaClone, go ahead and click the Create a Clone Group button under the Your Custom Groups tab. The feature can be used to combine and filter a group’s holdings by sector and/or market capitalization then backtest performance.

Before we checked how each individual clone performed over time. Now, with a group, you can see how the whole portfolio performs. You can add or subtract funds to get your portfolio right.

I settled on a strategy that tracked 9 different funds. I’d suggest a portfolio that has more holdings in it. Occasionally, the funds I’m tracking held the same stock (Apple $AAPL was everyone’s favorite in 2011) and that meant I had few positions and the portfolio fluctuated more than I would have liked.

6. Rebalance quarterly

AlphaClone updates every quarter, a month after hedge funds file. You’ll see what was bought and sold and you can make any changes in your real-money portfolios based on the new names in the portfolio.

Creating a piggybacked portfolio works — both in practice and in the research.

Will it continue to work? Who knows, but like tracking insider trading, it makes sense that it should and AlphaClone is essential to doing this the right way.

Was this helpful? Let me know in the comments.

Who do you think are finance’s top thought leaders?

There’s a lot of second-rate financial information and poor financial advice floating around online. These people rise above the noise, helping themselves and those around them make better investment decisions.

So, who do you think is making a difference? Who’s a thought-leader helping us understand more about investing or finance?

The list below is TOTALLY incomplete but it’s a start of some of my favorite investing voices. Who are yours?

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How to use Twitter to make money in the stock market

Being able to predict movements in the stock market – with any level of accuracy — has drawn a lot of attention lately. I’m personally glad to see Professor Bollan – the author of the famous Twitter-sentiment-stock-market-predictor paper – back in the fray.

Of course, I’m not objective– my Tradestreaming book was early on the scene to take a look at how research and investors are finding ways to use social media to make better — smarter — investment decisions.

This time, Bollan takes the discussion a step forward in looking for the connecting between social media and investing– by looking at many of the tools investors use to predict future stock market moves.

These indicators, like the Investors Intelligence or Daily Investor Sentiment, measure investor mood. Behavioral finance stresses that factors like emotion and mood impact investor decision making and therefore, markets.

Bollan’s new paper, Predicting Financial Markets: Comparing Survey,News, Twitter and Search Engine Data compares a set of best forecasting tools to see which are most accurate and useful for investors.

How to use social media to invest

Bollan’s findings include: Continue reading “How to use Twitter to make money in the stock market”

Tradestreaming’s Best Investment Book for 2011: Laughing at Wall Street

I hate to say this but most investment books suck (minus Tradestreaming, of course :-))

But seriously, books that try to teach something valuable about investing frequently miss their

best investing book of 2011

marks not because they’re poorly written (some are) or lack good research (some do).  There’s a problem in trying to distill the process down to a how-to approach, to a magic formula.

Investing is a unfurling learning process and one that can be personalized to the investor. It’s hard to create a one-size-fits-all, get-rich-trying investment strategy that distills down so easily to a 250-page book.

Continue reading “Tradestreaming’s Best Investment Book for 2011: Laughing at Wall Street”

The real reason investing clubs are drying up (and what we should do about it)

Like radio stations that play the Flock of Seagulls and barbers who know — really know — how to cut the high fade, investing clubs are quickly disappearing.

But is that a bad thing?

According to a recent Reuters article, there are only about 5500 investment clubs in the U.S., down from 60,000 during the tech bubble.

“Oh, the numbers are definitely down,” says Adam Ritt, communications director for BetterInvesting, the Madison Heights, Michigan-based investors’ association whose members include clubs around the country. “It’s been a steady trend downward for a long time.”

The article hypothesizes about the reasons for the investment club’s demise, citing poor stock market returns, online investment research, and less money around to invest.

But these aren’t the real reasons investment clubs are disappearing.

Continue reading “The real reason investing clubs are drying up (and what we should do about it)”

11 reasons why 2011 was an outstanding year for investors

2011 has been one of the best years on record for investors.

That’s right — you heard me.  One of the best years for investors.

I’m not talking about the S&P500 which is still down about 3% for the year.  The jury’s still out whether the year will end up in the green or red for investors.

But performance is NOT what I’m talking about.

2011 has been a great year for investors in other ways.  Individual investors have never had so much choice, low-cost investment options.  This year was a break-through for investors with new investing and research platforms mushrooming up around us as we slept.

We’ve never seen such a real move of the financial industry to move to the same side of the investing table.

Investors haven’t seen content — good content — written by women for womenData and apps are changing the way we research and invest — investing has become a collaborative process.

The great thing is that I was writing about all these trends in 2010 when I published Tradestreaming.

Now they’re a reality.

So without further-ado (and as the New Year rapidly approaches), let me get to my 11 reasons why 2011 was an awesome year for investing.
Continue reading “11 reasons why 2011 was an outstanding year for investors”

[free ebook] The Insightful Investor: How to use cutting-edge psychology to invest smarter

Do you really want to become a better investor? Do you want to learn from your mistakes and learn to make better investment decisions?

For decades, behavioral economics/finance has been uncovering all the ways we make mistakes as investors. What’s been missing is how to correct these mistakes — how to turn these behaviors on their heads and make better investments.

The Insightful Investor does just that. In this free ebook, you’ll learn

Continue reading “[free ebook] The Insightful Investor: How to use cutting-edge psychology to invest smarter”

How to beat Wall Street by using Facebook, reading tabloids and shopping – with Chris Camillo

Chris Camillo isn’t a professional investor but he know how to invest.

book by Chris CamilloHe turned $20,000 into over $2,000,000 by shopping at the mall, connecting on Facebook, and reading tabloids. Without even looking at a balance sheet or income statement, Chris takes big bets on trends he believes others aren’t aware of.

Then he heads to Facebook to validate his ideas with his social network.

He tells all in a new book, Laughing at Wall Street:  How I Beat the Pros at Investing (by Reading Tabloids, Shopping at the Mall, and Connecting on Facebook) and How You Can, Too

Join Chris and me as we discuss his investment philosophy, how it works, and why he believes it’s a better way to invest.

Continue reading “How to beat Wall Street by using Facebook, reading tabloids and shopping – with Chris Camillo”