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JohnCLeven (82.24)

A site to more accurately track returns

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June 04, 2013 – Comments (1)

As many fools are well aware, being a Caps Genius, with a 99+ rating dosen't always mean being a great stock picker.

Bbmaven's great  blog "Caps Geniuses" http://caps.fool.com/Blogs/caps-geniuses/792490 goes into more detail over this common topic.

With this inherent weakness of CAPS in mind, I recently stumbled upon a site called marketocracy.com, which is a pretty cool way to track a virtual portfolio. It has some pretty strict rules to keep your fund "in compliance", but it does all of the tracking work for you.

According to marketocracy, my virtual portfolio, known as Teego Capital, has returned 14.39% (68.53% annualized) since the May 2, 2013 inception. The S&P 500 has returned 8.62% (37.87% annualized) over the same span.

Please see the "compliance rules" below:

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"In order to be eligible for Marketocracy rankings, you must follow diversification rules that are similar to those that real-world fund managers must face. We require that you meet these rules for a majority (51%) of a given quarter in order to be compliant — so we‘ve designed this report to help you keep track of your current compliance statistics, as well as your historical compliance and ranking eligibility.

There are a few simple rules to remaining compliant:

You cannot purchase a stock so that it will increase your position to over 25% of your portfolio‘s value. If you violate this rule, your fund's effective inception date will be reset to the date that you bring the find back into compliance with all compliance rules, not just the 25% rule If a sub-25% position rises in value above the 25% threshold (without additional purchases), your fund will be out of compliance until you sell of enough to bring it below the threshold. (However, your inception date will not be reset.) You may only hold up to 35% if your portfolio‘s value in cash. The other 65% (or more) must be invested in stocks. Real fund managers are paid to invest, not hold cash, and so the SEC requires that they meet this cash rule — hence we also require you to follow this rule a majority (51% or more) of the time. Half of your long portfolio may be in positions that may not exceed 25% of the value your total portfolio value. That means that you can have two 25% positions taking up that entire half of the portfolio, or, you can have five 10% positions (since none exceed 25%). The other half of your long portfolio may be in positions that may not exceed 10% of the value your total portfolio value. At the least, this means that you would need to hold 5 long positions worth 10% each. However, you can (and likely will) hold a few more positions to make sure you have some breathing room below the 10% threshold. Negative cash balances may not exceed 5% of total portfolio value. If this happens for more than 7 days per quarter, you are out of compliance. That means that you may not spend more cash than you have to buy stock — or in other words, you may not use margin.

Note: Mirror funds, or funds within your account with a 50% or greater overlap in holdings with another fund, are disqualified from ranking consideration."

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So, I don't know about you guys, but I plan to use this site to more accurately track virtual performance. It will be a supplement to the Fool, not a replacement. CAPS has a community, and feedback...marketocracy dosen't.

I'd like to see a few other Fools give this a try, and see how their CAPS rank correlates to their actual returns.

I will be writing a quarterly blog on my marketocracy returns.

For those who may be curious: my marketocracy portfolio is really simple. It's about as concentrated as the compliance rule will allow. On Mar 2 (inception date) I simply made DTV and COH about 23% of the portfolio each, and made IBM, WFC, AAP, BBBY, NOV, and BP each about 8% of the portfolio. I left 10% in cash.

The only changes I made, in the whole 3 months since inception were:1)  selling out of BP at a minimal gain, 2) buying CHRW to replace BP, and 3)adding a little to the IBM position.

So far i've doubled the S&P 500, but 3 months is not nearly long enough to jump to any rash conclusions. Maybe, if I can keep that up for 3 years or so, i'll start jumping to conclusions.

Anyway, that's marketocracy.com, and my Teego Capital profile. I'll update my virtual portfolios progress in another 3 months. Hopefully, some other Fools will give marketocracy a try...i'd love to see the results!

Please comment and share your thoughts on using a site like this to supplement the Fool community, by providing a better way to track portfolio performance.

Thanks for reading!

1 Comments – Post Your Own

#1) On June 05, 2013 at 10:05 AM, ElCid16 (98.07) wrote:

I'm down.  I created a profile this morning.  It's a RL portfolio-ish.

 

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