Covestor CEO Rikki Tahta Responds To The Dough Roller’s Question–Is Covestor Bad For Investors

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Three days ago I asked whether Covestor is bad for investors. In case you’re not familiar with Covestor, it is a new site that allows you to track your actual portfolio and to publish it for others to follow. I wondered if Covestor would encourage bad investing habits as some might be tempted to chase short-term gains at the expense of long-term wealth. In response, Rikki Tahta, the CEO of Covestor, posted a comment to the article responding to my question. Here is Rikki’s comment in its entirety:

Hi - I’m Rikki Tahta the CEO of Covestor. This is a very good post because it does highlight a macro problem that Covestor sets out to address. That in the abscence of transparency, real money and multi-measurement - the attention will get sucked by the outliers

So what are we doing to address that:

1) add full transparency and let everyone see where the results come from, the risk as well as the retun - and how long they’ve outperformed benchmarks

2) Multi-faceted rankings. Investment is not a single axis competition. I am interested in who performs well with low trading volumes, diversifed or tight portfolios, sectors or geographies - when we launch rankings we will have over 50 tables

3) It has to be real money. If someone can consistently make real returns with real money and has the risk profile I’m comfortable with - then I certainly interested.

Ultimately no returns on Covestor are ever going to be as good as the best posted on fantasy sites such as social picks or CAPS - because, without real money, there is no dis-incentive for high risk ‘attention getting’ bets.

I personally am a buy-and-hold investor and one of the reasons I founded this business with my partners is not because I wanted to find risky traders - but because I was appalled at the cost of private wealth managers and the lack of transparency and choice I had in choosing who to take allocation guidance from.

So give me some boring options please - for 75% of my money that will go for my retirement and my kid’s education - I want boring sensible planning. I just don’t want to pay 3% to have it managed by a brand name bank.

As I mentioned in my previous post about Covestor, I do intend to try it out and to publish a widget here to track my portfolio. Once I’ve used Covestor for a while, I’ll revisit this question. Until then, let me know what you think about Covestor.

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