CAPS Version II
As a kind of journeyman investor I have found the CAPS competition very valuable but I'm not sure for it's original stated intent. I don't spend any time looking at the community ratings of the stocks but the competition has forced me to follow a lot more stocks than I would follow normally and I think this has been very useful to me. I also enjoy following other players to see how different strategies play out but this is what has prompted this post. The clear best strategy to climbing to the very top of CAPS is what I have seen called harvesting. Maxing out your 200 picks and constantly closing out winners to bank points and score. I know others have complained about how valuable this is in the real world and I'm not here to beat that dead horse. It did get me to thinking about how you could improve CAPS so that player ranking became more meaningful.
The biggest problem I kept coming up with is how do you do this in a competition that's already been up and running for a few years now? Do you just start over and risk alienating everyone who has invested time and energy in the current system? If you do nothing do you risk alienating talented investors that may not like seeing gaming the system by harvesting being rewarded? I think I came up with the perfect happy medium. You leave the current system in place but add a new player ranking system on top of it that would utilize the top picks feature in the portfolios.
Here's my outline, leave the current player ranking system alone but add a new one that I'll CAPS II. Players will be required to add selections to CAPS II by utilizing the Top Picks feature in their regular CAPS portfolio. In other words your CAPS II portfolio is your top picks from your regular portfolio but there will be different rules in CAPS II:
1. You must have between a minimum of 25 and a maximum of 50 picks to be ranked in CAPS II.
2. You are ranked based on points per pick (beating S&P) weighted to the number of picks you make.
3. Leveraged ETF's are either not eligible or limited to something like 5% or 10% of your total CAPS II picks.
4. There will be some sort of limit on total number of picks per TTM to eliminate harvesting. I'm not sure what would be appropriate but maybe something like 200 which would be 4X the maximum active picks.
The idea is to create a new ranking system that rewards high score per pick but does it over enough picks and enough time to be meaningful. Right now CAPS tracks high pick score leaders but they all basically started portfolios at the bottom of the panicked market in March 2009 and only have a handful of picks that they are milking. This is the opposite extreme of harvesting. By utilizing the Top Picks feature of the current CAPS system and just creating a second ranking system you can implement this without effecting the current system and even utilize the current system as the starting pool of stocks for the more focused CAPS II. You could then just add CAPS II portfolios (current and ended) to the portfolio options.
One last suggestion, TMF should reward subs who come up with significant suggestions that get implemented with handsome monetary compensation :)