Due to a minor website issue over the weekend, some new members to Cake may not have seen their portfolio information instantly upon linking. This issue is now resolved and the portfolio information did indeed successfully and securely link to Cake. To see your portfolio insights, log in to Cake.

Please let us know if you have any other issues or questions – email service@cakefinancial.com.

Best,
Erica

One year after it launched at TechCrunch40, Cake Financial is rolling out a new design today with a load of new features. One of the most interesting is a new stock index called the Cakedex that is based on the top 100 holdings of the top performing in…

I’m fairly sure that Marketocracy does have multiple accounts for some of its users. I run a creative agency (Traction) and they were our first client. We helped them build their community and launch their first fund (we started working with them in 2000 and if memory serves me, launched the m100 Fund in 2001).

The idea of using the wisdom of crowds to power a fund was a bit ahead of its time back then, but the premise is solid. Back when we launched Marketocracy, we latched onto the fact that 85% of professional fund managers weren’t beating the S&P500. If you read Fast Company last month (fastcompany.com/magazine/128/made-to-stick-the-myth-of-mutual-funds.html) you’d see that’s still not too far off today. IMHO, social mutual funds are going to be a major new investment vehicle in the coming year or so.

(Full disclosure: Traction just started working with a new start-up in the space called Inner8 that’s launching a private beta in a couple of weeks. They’re similar to Cake in that you’ll actually be able to invest and leverage a community to improve your investment performance and get new ideas, but are combining that with cool analytics tools—i.e. if you like Apple, you can see what stocks trend most closely with Apple. If anyone’s interested in checking out the beta, email me at adam-at-tractionco.com and I’ll get you a password when it goes live).

Anyhow, I think it’ll be interesting to see if real investment accounts (Cake) vs. monopoly money investment accounts (Marketocracy) perform better in the context of a social fund. In both cases it looks like the fund is based on the portfolios of the top 100 investors. But I’m sure people are willing to take more risks with fake money. Is that good or bad on an aggregate scale? Don’t know, but it’ll be interesting to find out. (BTW, Inner8’s model will be one where you use the community to get investment advice without tracking actual holdings).

Certainly can’t be worse than my Vanguard fund has done for the last 8 years.

Adam

How would this work? Would there be a management fee? How would this be structured? I take it if the Cakedex is based on the top 100 users, their positions would not be visible on the site if a fee is charged for management.

One of the biggest differences between our two sites is that Cake builds all of our data aggregation systems in-house (rather than using Yodlee) which means that Cake members can get access to their portfolio information as far back as 10 years (instead of 3 months). With this data, Cake calculates performance metrics like AAR, gains/loss on specific holdings, etc.

All of the information you see in your Cake account is verified by a direct link to your brokerage; no information is manually entered… which means that, when you look at your performance or other people’s, you know that it’s accurate/verified. On Covestor, members can manually change their data.

I guess there’s a new sucker born every minute…

I used to work at a stock brokerage in SF (haha) and I’m way happy with finance 2.0, though – some of the functionality augments the standard Web 1.0 financial tools on Bloomberg, Yahoo Finance, CNN, Ameritrade, etc.

There is absolutely no comparison with Mint.com; two different (both very good) products.

Also, any finance professional will tell you that indexes are updated from time to time: some companies are dropped and others are added, and therefore these indexes do not reflect the true situation of the overall market, because only the best performers are added to the index, which inflates it artificially. The same will happen to Cakedex and it is almost guaranteed that it will “beat the market”.
The true numbers on its performance will come up only when a real person invests real money in this index (which will probably be a basket of stocks until the ETF is created), and update this basket as companies get dropped and added to it – what that person will have in his/her account in 5 years will reflect the true performance of this index.

But, as I always wrote about this kind of sites, amateur investing is a nice pastime if you don’t try to make a killing with betting on stocks. It’s addictive – thus Cake will have a good bunch of devoted followers.
Good luck!