On an Interesting Experiment
Today, I’d like to invite you to join me in an interesting experiment. To test the importance of focused investing and both its positive and negative effects, I’ve decided to set up five simulated funds with varying restrictions and see how they perform. There’s a site that allows you to do this sort of thing called Marketocracy. I can’t yet vouch for the service, but it’s free.
I’m more interested in testing my funds' performance against each other than I am in testing their performance against the markets. The restrictions to be tested are:
1. A Home State Fund (only invests in companies headquartered in one’s home state – mine is NJ)
2. A Top 20 Ideas Fund (spreads assets evenly over one’s top 20 ideas)
3. A Top 100 Ideas Fund (spreads assets evenly over one’s top 100 ideas)
4. An Over 10b Fund (only invests in companies with market caps > $10 billion)
5. An Under 1b Fund (only invests in companies with market caps < $1 billion)
If you want to see examples of these funds, you can view my five creations: Jersey Fund, Sniper Fund, Shotgun Fund, Goliath Fund, and David Fund.
I hope to create five groups on Marketocracy that will allow us to track each type of fund and discuss the difficulties caused by these limitations. All funds should also meet Marketocracy’s compliance rules.
I hope some of you will join me in this experiment. We might learn something.
(I know there are readers outside the U.S., for you the Home State Fund will simply be a Home Country Fund. This isn’t a huge advantage, remember some U.S. readers could be from states like California – so, they’ll have a big economy to play in too.)
You can start by joining any or all of the first three clubs:
(I will set the other two clubs up as soon as Marketocracy gives me permission to go beyond the three club limit).
You need to be invited to join these clubs. Anyone can get an invitation by sending an email to: geoff@gannononinvesting.com asking for an invite. All readers will be welcomed.
You can also request an invite from inside Marketocracy.
Please tell me what you think of this idea by commenting to this post.
Comments
You can count me in. I'll pull together a DC Metro area fund and maybe a fund based on the Magic Formula by Joel Greenblatt.
Posted by: George | February 3, 2006 12:36 AM
Great, George.
I'm looking forward to seeing how you choose to put those funds together.
Posted by: Geoff Gannon | February 3, 2006 12:55 AM
I was thinking about doing the "shotgun" but it was just too hard to find 100 compelling ideas. I'm gonna do the "sniper" which IMO is pretty much a shotgun approach for me. LOL! It was hard to put together 20 stocks that I thought were worth buying today, without cutting some corners.
It's out there awaiting approval as NTTV. I took the screener I use for personal investments, removed some homebuilders and the largest earnings shortfalls for 2006 based on analysts' projection - other than that, it's pretty random off the screener, no DD or proxies read, etc. Some of them are stocks that I've talked about before.
I think doing a fairly random smattering from the screener I use will be interesting from two angles: (1) it will determine if the other stuff I do adds value or not, and (2) it will provide for ease of administration.
Over the long haul, I will probably start another portfolio out there, but this will be a good start.
Posted by: nodoodahs | February 6, 2006 12:31 PM