The wisdom of the crowds has been used to better predict world events, elections, and the outcomes of sporting events. It’s now being used for more accurate forecasting of stock prices. Instead of following experts, crowdsourcing investment ideas seeks to assess what the masses think about a specific stock. The crowd is frequently more accurate in its predictions than top analysts?.
Enter Social Media
But with the onslaught of investors publishing their thoughts on stocks and the market on Facebook and Twitter, it’s hard for investors to monitor all the noise. Determining what the crowd thinks about a specific investment is tricky. Therefore, we’ll also explore different ways that investors can effectively plumb the wisdom of the crowds to build a portfolio populated with stocks the crowd thinks are going up.
What if there was a way to leverage the collective knowledge of all investors out there and use it to make a profit? What if you could build a portfolio that took investment ideas from the throngs of day traders and couch-potato investors, firemen and police officers, lawyers and doctors—a population of millions of investors? Figure out where the herd mentality thinks profits are and damn the experts.
Tradestreaming is that way.
<– Previous: Following the Insiders I Next: Screening 2.0 –>
Learn and invest like the big boys
Tradestreaming is about using social media and Internet resources to plug into the collective investment activities of the world’s best and most profitable investors. Research has shown that by piggybacking these guru investors — investing in some of the same stocks they’re buying — provides us close to the same returns as we would rack up if the top hedge funds — people like SAC’s Cohen, Berkshire’s Buffett, Carl Icahn and George Soros — managed our portfolios directly.
How to piggyback invest
The great thing about today’s investing environment is that there is an increasing level of transparency to some of the top hedge funds’ activities. They’re required (or encouraged) to file periodic reports of their holdings. These reports are a gold mine of information as investors get a window into what these guru investors are investing in or selling out of their portfolios.
With Tradestreaming, we would need millions of dollars of investable assets just for these top funds to consider managing our monies. Instead, by mimicking hedge fund activity, we essentially outsource our research to the brightest and most profitable funds and invest alongside them.
Sites like AlphaClone and Marketfolly help us decipher exactly what investment funds are doing. There are a lot of tools that can assist in this process. That’s what Tradestreaming is all about.
<- Previous: Ride the Long Tail I Next: Follow the Insiders –>
Photo credit: theyoungones
This is part one of a series that takes a birds-eye view into the concepts I develop in my book, Tradestreaming. Readers should also subscribe to my newsletter to stay on top of all news, posts and share in some of the ideas I’ll be developing. Subscribe here.
The Problem: Too much info
Does your head spin with the vast amount of financial information on the Internet?
Are you bombarded with numerous talking heads, each one purporting to have developed a better system, a better mousetrap, for investors and their long term performance?
With the reams of data and discussion on the Internet and 24/7 cable channels talking about the markets and every move upward or downward, it’s become almost impossible for an investor to find his way. Every get rich schemer plays into this frustration with promises of quick profits and little risk.
Tradestreaming: A Better Way
Tradestreaming is all about using the Internet (and in particular, social media sites like Twitter) to make better, more accurate — more informed — investment decisions.
Let’s face it: most investors struggle to beat the markets. We make great stock picks but we also buy losers and don’t sell them soon enough. The research shows that individuals (and many professionals) struggle to keep up with (let alone, beat) the stock market. That’s a fact.
By plugging into the massive amount of profitable information online — the collective Tradestream – investors can piggyback on the successes of others and their time-tested strategies to build better portfolios for the long term.
I hope you’ll stick around for the ride.
Next => Part 2: What is Tradestreaming
Photo by Nestor Galina