RD's Picks

How are we doing?

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Most of us have lost money in the game, but that only tells part of the story in a market where, as of the 14 Mar close, the S&P 500 has lost over 6.5% since its close on 31 Jan. For the longer term players, the S&P 500 is down 11.7% since the 27 Jul 2007 close - the last close before we started playing.

For the folks who started playing this round, any Mar 14 closing fund value over $934,416.60 is ahead of the benchmark used by most mutual fund managers. For those playing in the long term category, if your fund value is over $882,922.65, you're doing well.

I copied the leaderboard from the main SLO page and the standings from Marketocracy into a spreadsheet and tried to make some sense out all the numbers. As most have observed, the leaderboard numbers are suspect and most players are buried in the stats under the people who apparently have opted not to play. All the following analysis is as of the 13 March close since that was the most recent update for both listings.

Sidebar on leaderboard stats: The leaderboard shows the correct account value for me, but shows my return for the current round as -3.75%. Comparing the Marketocracy ledger values from 13 Mar and 31 Jan, I get +.04%. It's safe to assume the return stats for others also have errors.

First, I tried to weed out the non-players. My assumption was that everyone with identical fund values just under a million dollars was probably not playing. Since the leaderboard is the only listing with fund values, I sorted that. Somewhat surprising, there are two large groups clustered at fund values of $998,877.33 and $998,849.96. The difference between those two numbers would match a one-day delta in the starting point for the funds. Not sure if that's what happened, but it would be nice if we all had a consistent start point. Dropping all the players with those exact fund values out leaves only 271 of us actually competing. The Marketocracy stats show 3 and 6-month return data, by sorting on that and assuming that the only the long term players would have 6 month data, I came up with 191 players that started with SLO2; 80 continued playing their SLO1 portfolios.

As of 13 March, the S&P 500 benchmarks equate to $954,249.03 for SLO2 and $901,662.15 for the longer term accounts. Among the 191 active players who started fresh with SLO2, 124 (65%) are beating the S&P. For the longer term, 53 of 80 (66%) are ahead of the benchmark. Keep in mind that includes Marketocracy's management fees and very low cash interest rates. When many studies show that something like 75 or 80% of mutual fund managers don't beat their benchmarks, I'd say that as a group we're doing pretty well.

What I think this clearly shows is that individual investors can hold their own in the financial market if they're willing to spend some time researching investments and managing their portfolios. Better access to earnings estimates, conference calls and other information combined with very low or free commission brokerage accounts go a long way toward tipping the balance from mutual funds to self-managed portfolios.

A smart MBA student could probably come up with a good research paper using the SLO contests and developing some theories and trends on the pros and cons of self-directed portfolios vs. funds for individual investors.

Thanks for reading and questions or comments are welcome.