Marketocracy.com

If you think you have what it takes to be an analyst, or even better, a mutual fund manager, then register with Marketocracy.com (Figure 1), where you get the opportunity to try your hand at fund management. Best of all, if you do well, you may find yourself actually managing a fund for Marketocracy.com. Not a bad deal!

FIGURE 1: MARKETOCRACY.COM. If you think you have what it takes to be an analyst or a mutual fund manager, then register with Marketocracy.com, where you get the opportunity to try your hand at fund management.

So where did this idea come from? You may have heard about Firsthand Technology Value, the top-performing mutual fund in 1999. In the previous five years, the fund had an average annual return since inception of 50.62%, yet the fund managers, Kevin Landis and Ken Kam, had had no experience in fund management. However, they did have firsthand experience in the medical and semiconductor industries. "Although it took us about three years to get started, we were the top-performing fund within three years and remained in that position after five," notes Kam about his experience at Firsthand.

It was this experience that led Kam to start Marketocracy.com. As president and CEO of Marketocracy, Inc., Kam's objective is to have a continuous pool of money managers. He feels that the criteria used to select portfolio fund managers are not effective, adding that a more effective method is to identify individuals who have excellent track records, which is the primary objective of Marketocracy.com. It's a site that lets people in on a virtual mutual fund in real time, where they can build funds and manage them as realistically as possible.

To see what the site is all about, I decided to give it a try. Registration is free and each member is provided with $1 million of fictitious money to manage per fund. Just like any game, there are rules, which are easily accessible from the website. Simply put, each member may create up to 10 funds with a limit of 200 stocks. When you create a fund, you have to classify it based on its investment objective -- value, growth, or blend -- and industry focus --general or sector-specific -- in order to qualify for ranking.

Kam's objective is simple and best described in the following steps, as stated on the home page:

1 Marketocracy gives you $1,000,000 of virtual money to invest, and they take care of the administrative details.
2 You turn out to be one of the best investors in the world.
3 Marketocracy hires you as a professional money manager.

Kam has created as much of a real-world simulation as possible. "We want people to operate the way they would in the real world. It's no use if someone calls and says they wanted to purchase a stock last week, but %C9," he adds. If it doesn't work in the real world, it doesn't work at Marketocracy.com. If you want to buy or sell a stock, you have to do it when you think the time is right. It's not a difficult process. Just go to the trading section and buy or sell a specific stock. The entry will be automatically accounted.

PERFORMANCE TOOLS

There are several performance measurement tools included at this website, based on what has worked well for Kam. Once you register as a member, you will receive a booklet explaining the various tools in detail.

The performance of your portfolio(s) is measured using net asset value (NAV) (Figure 2), which is how performance of all mutual funds is measured. Reports of your portfolios are updated on a quarterly basis. You can also view a performance stratification report that divides your top performers, mid-level performers, and bottom performers. This helps you identify your strengths and weaknesses, from which you can determine what you should exploit and what you should avoid.

FIGURE 2: NAV. The performance of your portfolio(s) is measured using net asset value (NAV), which is how performance of all mutual funds is measured. Reports of your portfolios are updated on a quarterly basis.

Marketocracy plans to include a market timing chart in the near future (Figure 3). This will show you what happened to stocks in your portfolio after you bought or sold them. Ideally, you want all the stocks you bought to go up and those you sold to go down. If the chart tells you otherwise, then it suggests that you had better work on improving your market timing strategy.

FIGURE 3: MARKET TIMING CHART. Marketocracy plans to include a market timing chart soon. This will show what happened to stocks in your portfolio and whether you should work on your market timing strategy.

CONCLUSION

Since its launch on July 17, 2000, Marketocracy.com has amassed close to 30,000 funds under its management. Kam is nothing but pleased about the response. "This is constant meritocracy. We have a good continuous pool of people managing money," he enthuses. Although it's too early to tell how many funds the company will end up managing, judging by the list of top performers listed on their home page, Kam certainly has something to look forward to.