As operators of social brokers and community trading portals like eToro, StockTwits, TradingView and Myfxbook will attest to, there is a lot of demand among traders for social interaction when it comes to trading. The demand is based on traders wanting to share ideas so that they can get community feedback, following successful traders to learn more about the market, and an overall need among traders to communicate to overcome boredom associated with following charts all day.
One of the drawbacks, though, of social trading and following is the lack of transparency at times. A social user may boast about several trades they have made, but it isn’t always easy to verify whether they in fact made the trades and, even if they did, how their overall portfolio performed. Solving this problem are numerous social platforms which use verified real accounts to provide more transparent user-performance results. Within the equity market, a startup tackling this problem is Nvestly.
Launched publicly in November 2014, Nvestly is a social investing platform that lets users track successful stock traders and create investment groups. Like any other social network, Nvestly’s success is tied to the size of its community and whether it can meaningfully grow to include the diverse array of users necessary to make the social aspects of the platform relevant.
To be appealing, Nvestly employs a portfolio analysis platform that performs 2,000 calculations in order to provide visual analysis to users. The analysis is provided for free to customers of large US equity brokers such as E-Trade, Fidelity, Charles Schwab and TD Ameritrade after they connect their accounts to Nvestly. Compared to standard broker reports, Nvestly’s analysis includes annualized return charts which normalize for cash in and out of the account, portfolio beta statistics and holding period information. Later releases will include risk metrics. Otavio Dalarossa, founder of Nvestly, explained to Forex Magnates: “To decide which tools to release, we cross-reference CFA curricula with user demand based on market surveys.”
Nvestly’s model is similar to that of Waze, which provided one of the first free voice-based GPS navigation tools to attract users to its social driving network. Similarly, the free portfolio performance tools provide value to stock investors which in turn populate the social trading network.
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Dalarossa explained that Nvestly is aiming to become more than just a trading community, but one that is able to provide additional value to investors since data is formulated from real user portfolios. As a result, Dalarossa believes that Nvestly has three main value adds that they are aiming to bring to the market.
First, trades posted are real and not just tweeted ideas like on other trading communities. Therefore, users know that when they follow another investor, the trade is actually taking place and they have their skin in the game. The second benefit is that user performances are real, and filtering by top investors yields real results. Third, using the real data, Nvestly plans on adding the ability for investors to gain merit rankings, allowing other users to follow them based on their expertise for a specific sector.
Dalarossa brought up Foursquare as an example, stating that the Investment Merits section is “analogous to the Foursquare badge idea, which was created to highlight expertise. I’d love to connect with a top investor who is a ‘VIX Guru,’ for example, and follow his insights, trades and portfolio.” Dalarossa added that in the future this model will lead to Nvestly understanding its users’ interests better, thus being able to offer expert investor recommendations to follow based on having similar trading interests.
As noted above, much of Nvestly’s future is tied to it successfully attracting a large enough user base to allow the crowdsourced, real-investor data to be meaningful. Dalarossa explained that they are getting positive feedback from beta users as he said, “Some users already expressed that they find Nvestly valuable because they can have discussions with their existing small groups.” However, he noted that becoming a large community is critical in order to be a relevant market information source for smaller stocks.
Currently, Nvestly is being offered to investors for free. Dalarossa explained that they will be incorporating a premium model in the future with paid features including “access to community-level info, which we may call the Insider Room, where you can view transactional-level sentiment data.” He described the product similarly to StockTwits, but unlike that product which calculates sentiment data based on posts, “Nvestly can offer sentiment data based on real trades.”
At the moment, Nvestly is targeting what they call “active investors,” those placing one-to-ten trades a month. But Dalarossa believes that longer-term investors will also be able to benefit form the weekly and monthly email summaries that the service provides. In the future, Nvestly will be adding a “virtual” portfolio feature to assist new investors in learning about the market.