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The Cost of CAPS



June 13, 2007 – Comments (3)

I have been a CAPS player since September 2006. At the moment I'm ranked 173 out of 30,129 players. For someone like me, I think that's a pretty fair achievement.

But like many things in life, I often tend to look around to see what other folks with the same interests, in this case stock selection, are doing that's making them more successful than I am. I mean if I'm ranked 173, then there must be 172 folks that are playing the stock selection game better than I am.

So thinking, the goal was to look at the most successful CAPS players to see what they were doing, in hopes of improving my overall CAPS score. Some of what I found I already knew, the CAPS leaders pick lots and lots of stocks.

But some of what I realized, I had never considered before, and it made me reconsider my own ranking when compared to the current CAPS leaders.

For instance I looked at the 12 highest rated CAPS players. On average, those 12 players have 169 active stock picks, while I have 23.

Those 12 CAPS leaders have ended, on average, 357 stock picks, while I've ended 4.

But here's the part I hadn't really considered, and it's something that CAPS doesn't allow for. The top 12 CAPS leaders have paid $7019.85 in trading costs, assuming an average of $7.95 per trade, while I've paid $246.45.

Yes I know, it's a game, and I understand it's a game just like I understand that everybody wants a place they can practice whatever it is that enjoy doing, whether it's snowboarding, BASE jumping, needlepoint, whatever. I get it.

I also get that eventually we play just like we practice, so if we practice with a bad habit, eventually we're gonna play with a bad habit. And while that bad habit may not be a big deal in shuffleboard, it could be a very big deal in skydiving.

And so I wonder about the new CAPS players, and/or those new to investing, that may be trying out different investment strategies. Have these players considered that in reality there is a cost associated with trading stocks, a cost of CAPS? 

In my case, I can look forward to trade commissions of $182.85 on my 23 stocks and since the stocks I'm playing in CAPS are the same stocks I own in my real life portfolio, I'm not to concerned about trade commissions.

But the leading 12 CAPS players get to look forward to trade commissions of $1343.55 to end the average 169 active stocks they hold, and since I sort of doubt these folk invest in the real world the same way they play CAPS, I have to ask if these folks have considered the cost of CAPS, bad habits and all.











3 Comments – Post Your Own

#1) On June 13, 2007 at 11:30 AM, TMFBent (99.81) wrote:

"But the leading 12 CAPS players get to look forward to trade commissions of $1343.55 to end the average 169 active stocks they hold, and since I sort of doubt these folk invest in the real world the same way they play CAPS, I have to ask if these folks have considered the cost of CAPS, bad habits and all. "

Really? Not in my free trading account. I pay zilch in commissions. (OK, not really, but I could get free trades, or close to it.) And, depending on the magnitude of the assumed capital invested, even multi-thousand dollar fees in absolute terms might come out to a rounding error.

So, good questions, but Caps, alas ain't investing. Not even close. No trading costs. No taxes. No weighting. No doubling down. No limit orders. No stop loss. Ridiculous 7-day hold rule. No options. No leverage of any kind. Unlimited capital. No tax-loss selling. No rebate on "shorts." Points for "accuracy." It goes on and on.

The way I see it, tere's no such thing as bad habits in Caps, there's just what works for individual players. And for the time being, deploying a ton of virtual capital, banking accuracy, and trading fairly frequently on terrible companies (via the red thumb) are some top strategies for some people.

It is what it is...


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#2) On June 13, 2007 at 12:28 PM, Hezakiah (92.12) wrote:

I would agree with most of what TMFBent said... there are many strategies that will work in CAPS that are totally not applicable to the real world -- such as thumbing down the same stock 5 times on its way down in order to add bonus percentage points to your score as well as banking extra accuracy points -- or picking every single stock in a hot sector, rather than just the best few. 

However, the main goal of CAPS, as I understand it, is not to rank the players based off of there investment prowess, but instead to rank individual stocks on their chances of outperforming the S&P 500.  Although, I would like to see some service aimed more at gauging investing ability (there is probably some out there).  Surely a flawed system, but useful and fun nonetheless.



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#3) On June 15, 2007 at 7:00 AM, wax (97.07) wrote:

I have been investing for a long time, and over the years I have read about all sorts of strategies. Mostly they were a variation of ones I had already heard about from my barber, or from a cabbie, or the parking attendant.

Regardless of where I heard it, it  would have been great to have a  place to "play" with those strategies.

But because I have been investing a while, I'm able to differentiate between "real" and "play", something I had assumed anyone playing CAPS was able to do.

That was until I had a couple of e-mails from some new Foolish members. That's when I realized that to some, CAPS was as real as it gets.

Both folks were taking the things they were reading and seeing in CAPS and attempting to apply them in the "real" world.

That's not the fault of TMF, CAPS, the government, or any living thing, it just another reality of life.

And that was the reason for my post. Just a reminder that for some, it's very possible to play the same way you practice.


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