The idea that you have to live in New York City and work on Wall Street to make money investing in financial markets is quickly becoming an old-wives tale–just ask users of Covestor.
Launched in 2007, Covestor offers self-investors transparent access to the personal portfolios of “over 150 Model Managers” which can be viewed, studied and mirrored by anyone using the site. According to the site , these models cover a broad range of “strategies, sectors, and risk levels” to appeal to investors of every kind.
So, exactly how much money can be made using Covestor? The top Investment Model on the site has achieved an incredulous 75.4% return over the past 365 days. The S&P 500, by comparison, has returned a measly 4.15% over the same time period.*
The model is owned and operated by Keshav Agrawal, an individual investor with “more than 10 years of experience in trading stocks and derivatives for his personal account” and a passion for “riding his motorcycle and traveling” according to his Manager page.
Agrawal’s model is fundamental–he evaluates potential investments by studying the economy as a whole, the conditions of the industry, the company’s financial condition, and its management. It is this type of investing that Warren Buffet employed to amass over $44 billion in the market.
The majority of Agrawal’s investments are in the global retail, technology and financial sectors, but he also tries “to take advantage of particular market conditions outside of those three sectors,” his model page says.
He currently averages nearly 74 trades per month, a high number for the average self-investor to replicate in just 20 trading days. Covestor provides a solution to this problem, though. Using a system called Portfolio Sync, Covestor users can set their account to automatically mirror every trade made by the portfolio manager. In addition, this arrangement is not binding in any way, as users can “switch managers or cash out at any time.”
What makes Covestor unique is the fact that, unlike many personal trading systems, there are “no sale fees, entry fees, or exit fees.” Instead, users pay per subscription and submit to a variable fee (between 0.5% and 2.5%) depending on the Manager and model they choose to follow. If you’re wondering, “What’s in it for Agrawal and other managers?” this is it. This small fee is split 50/50 between Covestor and the Manager.
Covestor’s fees are low, but this type of reward does not come without significant risk. Agrawal’s model, for example, receives a “5” on Covestor’s risk rating–the highest possible. And, in its worst 30-day period, the model’s return was -34.5%. Not a mark anyone wants to see on their portfolio.
Covestor is not a map to the pot of gold at the end of the investing rainbow, but it’s breaking down the traditional idea that self-investors must decide between employing a full-service advisor or day-trade on their own. In addition, it’s bringing an unprecedented level of transparency to the home office of everyday people–something that was previously quite rare. Considering the remarkable returns that some users are capturing with Covester, it’s worth more than just a glance.
*All numbers are as of the time of writing.
[image via desiedition]
