I received an email from the Wall Street Journal today informing me about their new, free service, the Market Data Centre. It is a worthwhile new service to be sure as it is full of useful market information. While I was on that site I followed a link to another service, http://www.stockpickr.com.

Stockpickr boasts that it uses social networking strategies to help users build effective investment portfolios. Here is what the company says it does:

What is StockPickr?
StockPickr is a free stock recommendation site that allows you to receive automated stock recommendations from thousands of portfolios, both professional and amateur, with a similar make-up to yours. Just enter your favorite stocks and within seconds you will receive new recommendations based on our internal algorithm matching your portfolio with the thousands of hedge funds, mutual funds and other peer portfolios (DIY portfolios) that have a similar composition. It also allows you to network, research and discover new great ideas in the financial market arena.

A quick visit to the site reveals a somewhat poorly designed interface with way too much going on. Still, the premise is an interesting one: Does a socially networked investment site give us an opportunity to improve our stock-picking?

Not everyone thinks so. Roger Ehrenberg of Information Arbitrage thinks the trend could be a disaster for investors:

It is particularly interesting to read some of the comments to the TechCrunch article. The diversity of comments pretty much represents that of the investing public - most comments have no appreciation for history or empirical research, a few are so far off the reservation (citing "wisdom of crowds" as the reason why such sites make sense) as to hardly warrant comment while a few actually raise the fundamental issues of indexing, risk management and diversification. The feel one gets (...read more...)