TechCrunch has a great writeup today abou upstart, kaChing, the most popular investment app currently on Facebook. It’s a pretty extensive writeup so I don’t have a lot to add here.
I would say that unlike Covestor or Vestopia/PersonalRIA, kaChing doesn’t require real money to be put to work behind the portfolios. So, when investors choose stocks short and long, they are doing it with play money. This definitely lowers the bar for participation. I’ve seen literature (gotta find a link to it) that says that for crowdsourcing/wisdom of the crowds in the investment field, real money doesn’t tip the scales to the community’s predictiveness towards price movement. I’m not sure that’s the case in an expert community which is geared towards bubbling up exceptionally good managers. Having been an analyst at a hedge fund, I can say that we certainly behave differently when there is real money on the line (especially, our own and not OPM) than when it’s fictitious. Just a point.
It looks like kaChing has the investor base and user base to leverage into becoming a formidable player in the field and helping to prevent future Madoff-like scandals by creating a whole-new level of visibility into fund managers’ workings. It will be interesting to see how kaChing and Covestor, both predicated on creating open systems, compete against a PersonalRIA/Vestopia which limit the participation to professionals on the portfolio side (while anyone can be a user).
All these systems will need more data and history (most investors look at 1,3,5 years history when chosing a mutual fund) to begin to chip away at the traditional marketing methods of mutual funds.
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