Cake Financial, a leading Investing 2.0 site which I’ve detailed here, is at it again with launch of new functionality. Cake plugs into your brokerage account and tracks trades and performance data and then in turn, overlays performance and risk data on top (something they have spent a lot of time refining) and then shares this information out with the rest of the Cake community.
Now, Cake has introduced financial planning tools to investors who use Cake. Called Investor Quick Check, Cake’s financial planning tool “is a report that gives you a clear picture about how well your investments have performed, your current risk level, and whether or not you’re beating the markets. We then take it a step farther and generate a list of personalized investments.”
What’s interesting here from a financial planning standpoint is that there are a lot of powerful planning/forecasting tools around. I assume the Cake tool uses a form of Monte Carlo analysis as well. Typically, financial planning software churns out some results at the portfolio level to tweak (in finance jargon, to “optimize” portfolios). Here, Cake’s software not only makes recommendations to the portfolio but these recommendations are based on the meta information Cake has about you and all the other users within Cake.
So, really, it sounds like you’d receive a very personalized set of results — results that include stocks/ETFs based on your risk profile as well as recommendations culled from other investors’ portfolios that are similar in smell and taste to an investor’s own portfolio.
This appears to have a lot of smarts in it and from a design perspective looks very easy to use (takes less than 5 minutes) for current or future Cake users. The fact that the system has access to a lot of your data also catapults the system ahead in its analysis. When markets are strong, financial planning tends to be underutilized. Now, in times of distress, many pre-/post-retirement investors are worrying about whether they can “make it”, reach their financial goals. Cake is helping people get there.
