BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

Openfolio Shows How Your Investing Stacks Up

Following
This article is more than 9 years old.

Do bankers invest smarter than tech people? No, not according to Openfolio which finds tech portfolio have grown faster than portfolios run by people in finance. Its participants do show a strong interest in tech —one in three Openfolio investors owns Apple .

The company was started by former Wall Streeters.

“We were working on Wall Street when we hatched the idea for Openfolio,” the founders explain on the company Web site. “We noticed how the open culture of our trading desks, where people freely shared ideas and insights, helped everyone succeed. But we also quickly realized that there was no platform, or scalable solution, to replicate that powerful experience in the real world – even though so much untapped wisdom resides in everyone’s extended networks. We wondered: isn’t sharing information about investing at least as important as sharing information on Foursquare or Tripadvisor or Spotify?”

Personal investing lacks transparency, said David Ma, who is responsible for business development at Openfolio, and it’s hard to know how other people are doing because talking about money is taboo. That’s why Openfolio shows the investments, without the dollar amounts, of participants.

“When you join,” explained Ma, “we ask for demographic information to identify which groups you belong to. You can also do this automatically by linking up your Facebook or LinkedIn , but it's not required. Lastly, you can also go private, which opts you out of all groups but still lets you see other people's info. To date, about 90 percent of people remain public and contribute data to the community.“This way you can share what you are doing with other people and compare your performance as an investor.”

The basic service is free although the founders are thinking they might add some premium series at a fee later.

Its top half of investors saw a 14.7 increase in their portfolios in 2014, slightly better than the S&P 500 which was up 13.7 percent but a lot better than that bottom half of Openfolio members who saw their portfolios fall 3.8 percent. The West Coast was up 5.9 percent, the Midwest 4.7 percent, the East 4.5 percent and the South lagged at 3.1 percent.

Openfolio launched in May with a Web site and added mobile functionality in October. Access is about evenly split between Web and mobile, Ma said

“Growth has been good, about 15 percent a week for the first couple of months and around 10 percent now; we are doubling every two months.”

User feedback has been positive; many have said the concept is so useful it is amazing no one had thought of it before. Since the site doesn’t show dollar amounts, it offers a feeling of collaboration rather than competition, he added.

“When you join, you give the people in your network visibility into the moving parts of your portfolio. Not the dollar amounts, naturally, but the individual components – the stocks, mutual funds, bonds and ETFs you’re holding, buying and selling.”

The site shows the performance only of the top performers and users can keep their portfolios private. Openfolio also captures information about famous investors, like Warren Buffet and Carl Icahn and deconstructs them so others can learn.

By ages, the 50-64 year olds did best with 8.6 percent growth, followed by 25-34 year olds who saw 7.3 percent, while those under 25 had just 2.2. percent. Women did better than men with 5.3 percent to 4.9 percent. Guessing investor nationality by last name they concluded that Russians took the most risk and Swiss the least.

Openfolio can link to the top 40 brokerage accounts and Openfolio can see that most of the investors take a passive, buy and hold approach to investing. The site is not designed for day traders, Ma added.

So far Openfolio hasn’t found any silver bullets, but it has seen some lead — behaviors that are tried and true. Investors do best when they as use funds rather than single stocks and when they stay invested and diversified.

“There’s a huge correlation between investors who hold a lot of cash and underperform because they miss the market upside,” Ma added. Of course, Openfolio has been riding a bull market; in a downturn like the financial crisis a certain amount, or total cash, might look brilliant.

Technology has also been a strong performers and people who work at Facebook or Google and get stock as part of their compensation have looked like genius investors because their company rewards have soared in value. The top retail investors in 2014 gained 16 percent last year and were typically over-invested in technology, said Ma, adding the usual caution about past performance being no indication of future success.

Some of the company’s conclusions — that investors are voting with their wallets on climate change by owning more Tesla that Exxon-Mobile, seem a bit of a reach — Tesla is sexy and high tech and as their chart points out it has been a star while Exxon-Mobile has been flat.

You can also see your portfolio against other groups, and find that people in finance are underperforming people in technology fairly dramatically. Of course, if technology is in bubble territory, as some people suggest, they may need to do a separate portfolio track showing grandmothers who have all their money in their local bank’s CDs.