Marketocracy Capital Management, LLC

What I Look For

I have been managing money for our clients for over 14 years, but I have been managing my family's money for much longer. Anyone seriously managing money for their family knows the pressure: the money you make or lose will directly impact the financial future of your family. They are depending upon you.

I manage money for clients with the same care and seriousness that I manage my family's money. So when the mutual fund I was co-managing averaged returns of 56% a year for five years and the stocks I knew how to invest in really well couldn't keep going up forever, I had to find other investment managers that I could trust to help me manage the money for our clients. I needed a team.

That's why I founded Marketocracy -- to find the best investment managers in the world to help me manage money for our clients and for my family. For over six years we have been tracking the trading decisions of 80,000 people managing 100,000 model portfolios at www.marketocracy.com.

For five years we've managed a mutual fund -- beating the S&P 500 in four out of five years -- by selecting a group of 100 model portfolios, we call the m100, to help guide our investments. I now have access to more detailed track records on more investors than anyone else in the world -- enough data to select the first four Marketocracy members that I trust to help me manage my family's money. We call them our mFOLIO Masters.

What gives me the confidence to select these four out of thousands? Over the years, I've met many people who in spite of having impressive credentials were terrible investors. Advanced degrees, years of experience, presentation skills, etc., are all poor indicators of investment skill. The best way I've found to tell whether someone has investment skill is to examine their track record. Here's what I look for.

Performance. The objective after all is to make money. A great track record does not guarantee great results, but a bad track record is enough to rule someone out.

Winning Ratios. I want someone who makes money on a high percentage of the stocks they put in their portfolio, and who acknowledges mistakes soon enough to cut losers off while letting the winners run.

Success Ratio - 1 Year. Lets face it, the S&P 500 generally outperforms most mutual fund managers. This measure tells me how consistently a manager would have beaten the S&P 500 for people willing to give him 1 year.

Alpha Range - 1 Year. Few managers beat the S&P 500 consistently. Even fewer beat it by enough to make a difference for investors. I want to know the minimum, maximum, and average amount by which a manager beats the market over any 1 year period in their track record.

Performance Zones. I want someone who has made money in more than one sector. This tells me whether a manager can get out of a sector when its time to get out.

Performance Zone Weights. I use this as an indicator of timeliness. When a manager's current portfolio is heavily weighted to sectors in which he has made a large percentage of his profits, I'd say he is playing to his strengths. When a manager starts to make big investments in sectors in which he has never made any money, I think its time to bench him.

Building and Managing a Team

Skilled investors perform their best when the landscape of market opportunities allow them to play to their strengths. Because the market is constantly changing, no one can be expected to perform at their best all the time. I use all of the data I described above and more to help me to decide when to pass someone the baton, and when to take it away.

These are not easy decisions and I can make mistakes. But I have more detailed data on more people at my disposal than anyone else giving me an advantage that seems to get bigger each year.

When people invest with us, they place a portion their financial future in our hands. With the team of skilled investors we have available to us, I feel we are better equipped to live up to that trust than any other firm. If you would like us to put them to work for you, click here.