Deciding where and when to spend, and how to invest, in the coming year doesn’t have to be as daunting as the jitters of the past 12 months seem to warrant. Cake Financial, a new online investment community that lets users follow their own portfolios and real-time trades as well as track those of investment leaders and friends, offers this advice.

1. Don’t trade so much. Trading too often is the No. 1 killer of investment performance, due to fees and capital gains that reduce profits. The best way to avoid both is to check yourself against other investors and key market indices before you buy or sell to be sure you’re making intelligent decisions.

2. Don’t forget the past. Examining how your investments performed in the past can help you refine your strategies for the coming year. Review as much of the history of your investments as possible — it will provide context about how your portfolio has performed over time and lend insight into ways you might alter your investment habits to reap greater returns.

3. Don’t talk to Chuck. Don’t rely on just one or two people for advice. Tap into multiple, proven parties, not just a single banker or broker, say, but a number of them.

4. Do talk about money. If you know other people who have been successful investors, don’t be afraid to discuss money with them, in broad terms that will not reveal your specific investments. A good question to ask is, “What’s your asset allocation?” That is, what percentage of your total investments are in stocks, in bonds, in real estate and other broad sectors. Opening up about your investing and inquiring of others about their approach may lead you to information that can change your outlook for the long run.

5. Challenge your adviser. If you’ve entrusted your financial health to an investment adviser, don’t hesitate to ask him or her to share his or her own investment record with you. You can verify it at www.cakefinancial.com, where it’s free to create an account that reflects one’s real portfolio and trades.

“The reason top-performers in the market share their ideas is that it’s not a zero-sum game for investors,” says Steve Carpenter, CEO of Cake Financial. “If you buy a stock and the whole world follows your choice, the market for that stock will go up and you’ll make more money.”

– MarketWatch.com

Tags: Cake

A new Web site aims to identify the smartest individual investors so you can copy their moves.

The web is lousy with investment advice, if you believe anonymous touts and short-sellers. Bondmaster001 told his Yahoo group that Apple was way overvalued and “this Xmas is going to suck.”

Okay, Bondmaster001, put your money on the table. A new Web site called Cake Financial invites users to reveal their trades in exchange for seeing everyone else’s. Sign up for a membership at Cake and you grant it access to your brokerage account. Members are ranked every day by how well they perform based on the risks their portfolios assume. In two months the site has signed up 1,600 members and is tracking $450 million in assets.

Cake founder Steven Carpenter, a 35-year-old tech entrepreneur, wants to tweak the professionals who claim a lock on Wall Street smarts. “Lots of individuals beat the market,” he says. “Investment managers get paid even if they lose your money.”

A sample of 169 Cake members (those whose brokerage accounts allowed access to trading histories) posted annual returns averaging 10.9% over the past three years. That beats the S&P 500’s 6.7%, but the outperformance may not mean much, given that the Cake players tend to like risky stocks and this has been a bull market. But look at this: Cake’s top-quartile performers averaged gains of 28.2%. That may not be pure luck. There might be really smart investors in the group.

Cake is free, for now. The site expects to receive its registered representative license in a few months. This will allow it to execute trades on behalf of users who want to shadow the smart members. Carpenter also plans to charge for detailed peeks inside the best portfolios and start a mutual fund based on those portfolios.

Cake asks a lot in requesting your brokerage account password, but it is so confident of its security that it will refund any cash lost in a breach. Still, Steven Anderson, who invested in Cake with Silicon Valley angel Ronald Conway, says “Trust is the biggest challenge.”

Crowd tracking on Wall Street is drawing a crowd. Another site, Covestor, has signed up more than $100 million worth of portfolios and will pay top investors a fee to reveal their trades. Marketocracy Masters 100 is a $44 million mutual fund that buys and sells stocks based on trades by the best long-term performers from a pool of 20,000 investors. The fund charges a highish 1.95% expense ratio but has beaten the market all but one year since 2001. “Not all the best investors are on Wall Street,” says manager Ken W. Kam.

But failure befell MetaMarkets’ OpenFund, which started in 1999. It also disclosed every trade as it happened and solicited tips from folks on the Web. The fund climbed 44% in the first few months but fell 70% before closing in 2001. OpenFund had heavy emphasis on tech stocks. Nine of the top ten positions at Cake, too, are tech stocks.

Terrance Odean, a professor of finance at UC, Berkeley’s business school, is skeptical of those who chase winners. Says Odean, “They think that guy is a genius, when he’s just really lucky.”

Don’t quote us on this, but that’s the dirty secret of the whole mutual fund industry.

Upper Crust

The top-performing investors signed up with Cake Financial own these tech-focused stocks and funds.

• Apple Computer (AAPL)
• Vanguard 500 Index (VFINX)
• Yahoo (YHOO)
• Google (GOOG)
• Lululemon (LULU)
• Mikros Systems (MKRS)
• VMware (VMW)
• Intuitive Surgical (ISRG)
• Ishares FTSE/Xinhua China 25 Index (FXI)
• Oracle (ORCL)

– Forbes.com

Tags: Cake

Where to go for advice you can trust

Before betting the farm on some hot new investment, head to these Web communities.

By Joe Light, Ismat Sarah Mangla and Pat Regnier

NEW YORK (Money Magazine) — Where on the Web can you find people talking about stock picks? Same place you find Lindsay Lohan gossip and goofy pictures of cats: pretty much everywhere.

There’s even a gaggle of new Facebooklike social-networking sites, such as CakeFinancial.com and the communities at online brokers Zecco.com and TradeKing.com, that let users link their personal profiles to their brokerage accounts so that others can see and talk about what they own.

The technology is neat, but it doesn’t solve the basic problem with stock chatter: If most pros can’t beat the market, what makes you think “GOOGfella4″ knows anything special?

And talking a lot about stocks has a way of encouraging you to trade more, which will make you poorer.

The best advice - in print, online or in conversation - is about long-term strategy, not stock picks.

And that’s where the “Boglehead” message boards shine. The Bogleheads got their start as an online community for fans of Vanguard funds at the Morningstar Web site, and they attracted a dedicated following that includes some top financial planners.

They’ve since set up a bigger, independent forum at Diehards.org.

This isn’t a place only for Vanguard account holders. It’s for anyone who wants to know more about Vanguard founder Jack Bogle’s eminently sensible investment philosophy: Keep your costs low, don’t chase performance, focus on asset allocation rather than stock picking, and invest early and often.

Trying to make sense of your 401(k) plan’s options? Post them on the board and you’ll get ideas for building a simple, low-cost portfolio.

Want advice on trading currencies? The Bogleheads will politely talk you out of it. Yes, it’s free advice from people you don’t know, so take it with the appropriate grain of salt. But you could pay big bucks for far, far worse ideas.

For serious, long-term thinking from investment pros, check out the monthly commentaries from leading bond investor Bill Gross at Pimco.com, strategist Michael Mauboussin’s quirky newsletter about investment thinking and psychology at leggmason.com/funds and the online journal from asset-allocation expert Bill Bernstein at EfficientFrontier.com.

– CNN Money.com

Tags: Cake

Investors who love company are finding lots of it on the Net.

By Anne Kates Smith

From Kiplinger’s Personal Finance magazine, December 2007

First, there were investment clubs. Then came message boards, where anonymous posters could flog stock picks and pans, and later, Marketocracy, an outfit with a market-beating mutual fund based on individuals’ picks. These days, a growing number of investors are taking a cue from the MySpace set, forming online networks that allow them to pit their portfolios against those of cyber comrades and to glean investment ideas — not from brokers or professional advisers, but from a thousand virtual brothers-in-law.

Hill Ferguson, a 35-year-old financial-services-software entrepreneur from San Francisco, recently signed up with Cake Financial, a free online service that launched in September. Cake users can track their own performance, follow what others in their network are doing in real time and track the moves of the best-performing investors on the site. Cake links directly to brokerage accounts for trading data used to rank portfolios. “That makes the information valid,” says Ferguson.

Even on fantasy sites, where stock picks are so much hot air, algorithms that rank community members supply proof that they know what they’re talking about — or not. Newly retooled Stockhouse.com has sought to silence spammers and hypesters with a reputation-ranking system for posters. TheUpDown.com, launched in September, plans to run a real-life fund based on members’ virtual trading, sharing profits with the top pickers. The test will be if there are any profits.

– Kiplinger.com

Tags: Cake