The need for a *credible* social investing site in India
*Update*: MoneyVidya.com has launched a credible stock picking community for Indian investors and traders. Our groundbreaking Member Rating System zeroes in on the high performers, so you’ll know who to track.
We’re currently in development but will be releasing our alpha soon. We’re going to keep our community private, because we’re really keen on ensuring that our early adopter base is made up of knowledgeable and enthusiastic traders and investors. Register your interest here.
I believe that retail investors – that is those of us that invest in the stock market – have the odds stacked pretty heavily against us. The biggest one really being that we’re pitted against large institutions – people who have had far greater resources in terms of research and analysis, and indeed training in high finance.
Even if we did have all the resources, and the knowledge, we just wouldn’t have the time. The guys working for large investment banks, literally do this for a living, and many retail investors – well, don’t. We have day jobs – and most of us cannot watch the trading screen and read research papers all day.
Despite being aware of these facts, we continue to choose to invest directly. Why? Because of the allure of high returns, the thrill of picking the right stock, and the excitement of watching our stock move in the right direction. Moreover, we like being in control of our own finances.
One keeps hearing all sorts of anecdotal statistics from various studies – one revealed that over a decade, only 20% of asset managers managed to beat the S&P 500. One can react to this statistic in two ways: either the retail investor thinks to himself that if sophisticated financial analysts have such a poor record, they don’t stand a chance.
Alternatively, they might think to themselves that the belief that ‘investing is best left to professionals’ is false. I tend to agree more with this view. If anything, statistics such as these should only serve to further encourage retail investors to participate more actively in the market. If professionals have such a poor success rate, we might as well give it a shot ourselves – besides, it’s a lot more fun!
Still, there is no arguing the fact that the above constraints of research resources and time still hold and that if retail investors could somehow overcome them, we would benefit. I believe that one way to overcome these disadvantages is by harnessing the power of the ‘social web’. That is, building a Facebook like application for retail investors – a community where investors can share stock research, and indeed use this platform to educate each other about investing in the stock market.
By pooling their bits of research together, investors will be able to obtain a much better understanding and a variety of opinions on individual stocks and the market, all in one place. Ideally, on such a platform, each user should be rated on their level of expertise – but democratically, based on the quality of the information and opinions they provide – and not arbitrarily named experts because they belong to a particular institution or wear a nice suit and come on CNBC TV18 and give pointless opinions like, “on the upside the Sensex could maybe-possibly-perhaps touch 18,000 but if things don’t go so well we could-might-possibly-someday-somehowsee it touching 10,000″
There are a large number of start-ups in the US market that have created just this kind of application. Socialpicks.com is a venture that allows users to share stock recommendations and rates individual users based on the performance of these recommendations. Updown.com is a stock market game where users provide rationale for their investment decisions. Zecco.com is an online brokerage that has tacked on a social network – one of the main features being the ability to share portfolios. Covestor.com also allows users to share their porfolios – in my opinion, Covestor is one of the best executed sites for the US market. They have achieved the holy trinity of any social network – great tools/features, a great user interface, and an extremely active community.
The phenomenon of Indian investors using the web to share information is hardly a new one. Active messageboards – such as Traderji.com (and indeed the messageboards on Moneycontrol.com) – or the various Yahoo! and Google stock market groups (which have been around for some time now) are testaments to this fact.
In fact, recently a number of Indian startups have also tried to make a foray into the social investing market. Stocksbuddy.com, Khelostocks.com (check out Ashish’s post on it here), Cafestocks.com, Markethero.in are some of them. Having said this, the only one that seems to look halfway decent is Markethero.in (check out Ashish’s post about it here.). Stocksbuddy seems to have a passionate group of entrepreneurs behind it, and they seem to have built a good userbase – but their user interface is very, very, unimpressive. If it aims to become popular amongst mainstream internet users, its crucial that Stocksbuddy.com enhance its look. When it comes to reading about advice or information related to money, users are especially sensitive to how credible the source of the information looks. Khelostocks.com is in an even greater need to enhance its look. Cafestocks is okay – parts of it still look amateurish, but it navigation is simple and intuitive. I think it made the mistake of releasing publicly far too early (as Pranav, from StartupDunia rightly pointed out in his review here)– it should have spent more time accumulating early adopters to seed content.
Apart from Markethero.in therefore, I don’t feel that any of the sites above have managed to really get the formula right. Even Markethero.in has marketed itself as a ’stock market game’, which I’m not sure is strikes the right tone amongst the serious minded and are looking for a social investing tool that really helps them carry out research. Given these facts, I think there might be room for another player in this market, assuming that it doesn’t make the same mistakes as the ones above. The market is still immature, and its too early to say that any of the players have really got a firm enough foothold in the market to be upset by a superior new entrant.
What are your thoughts on this post? On social investing in general? Leave your comments below!
Tags: Crowd Wisdom, Equities, Finance, Forecasting, Prediction Markets, Social Investing, Social Networking, Stock Market, Stocks, Wisdom of the Crowd
