Innovating Caps; a reflection in answer to a post of hall9999
I wrote this in answer to a blogpost of hall9999 where he suggests to limit the amount of stocks people can pick, among other things because of the problems new players have in "catching up".(http://caps.fool.com/ViewPlayer.aspx?t=01003935111856027161)
i am still just a beginner. But i have -like you- been thinking about caps and its peculiarities.
A few thoughts.
I think we should not alter the rules to quickly. Let see how this plays out for a while longer. People adapt, invent, circumvent. Observing and participating in that will be worthwhile. For example: new strategies are coming to the forefront. You could call them sector picking instead of stock picking. Among other things they are an answer to the question you raise above: how to amass points without taking on absurd (and therefore self defeating) risks. TMF wants to raise us as buy-and-hold-stock-picking children... . Some of us are exactly that. But others grow up into something completely different. I think that is interesting, exciting, and for caps as an investment tool very very good.
In general i think we should alter caps not by taking something away but by adding features. If possible in a way that adds complexity and opens up possibilities instead of limiting them.
One of the things i learned (again) from Caps is how important praise is. Especially if deserved. The lucky charms do that very effectively. I think one of the solutions to the problem of "catching up" already exists -but could be used more extensively and better. Most charms i can aim for irrespective of whether i am new. In effect some of them are more easily achieved when being new. (hottest week, month, 100 over 100) That mitigates partially the depressing look upwards at those 1000's of points. (How could it be used better? make more charms that are directly related to new players. Also, and i think very important in general, you should never lose a charm once you gain it. Being for example hottest player of the month is very difficult to achieve. If you have done it, that should stay visible. An easy solution would be to change the coloration of a charm when its no longer true ..but was.)
A second solution that already exists, is the new player category in itself. Within that category i am competing against people that are more or less in the same situation as i am. Therefore i can, in the beginning, measure myself against them instead of against all of caps. It is possible i think to make that existing feature more visible and prominent. For example by giving not one percentile (what is my position within all of caps) but giving two (what is my position within the new players.)
Over time however the existence of the new player category will not suffice. When caps is 10 years old the gap between beginners and the successful among the old hands could be insurmountable indeed. (Think of it as trying to catch Warren Buffet in dollar terms) The solution should be i think along the lines of the new player category. People should be constantly compared both to the general community (including the WB's) ánd to people in their "age" group. We could for example compare everybody to the group of people that entered in the six months surrounding their own entry date.
Your suggestion of limiting the amount of stocks people can choose intrigues me. I do not think it would solve the new player problem. In 10 years time there will be WB's among the limited stock pickers as well. But i nevertheless think that done in a certain way, your suggestion could give caps another dimension, would be a welcome addition.
I would like to see it introduced among lines like this. There should not be a change in the general limit. Those 200 stocks are fine and they give room to a plethora of strategies .. which is as it should be. However within that and as an extra possibilty people should be able to create like a sub list of stocks that is rated separately. They should be able to do that simply by marking a stock already in their portfolio. (It would give meaning to the dollar sign!) The rules for that sub list are debatable but in keeping with the TMF tradition and aims it could be something like this: You enter the rating only after you have marked a minimum of 20 stocks. You may enter no more then 30. All of the stocks should be outperform. You have to hold a stock for at least a month. If the number of marked stocks drops below 20 you drop out of the rating. (From this point there are two choices .. either your points score is frozen and if you enter again by marking more then 20 stocks you begin from zero...or ... if you enter again you unfreeze your score and add to the existing points)
Thinking about Caps is just as important i believe as thinking about our stock selections. This is a game, an information mine and an important experiment in collective intelligence. And it is fun,