kaChing: New Start-Up Recasts Mutual Fund Industry

In 2008, Daniel Carroll, now 27, founded kaChing, an online investing community where more than 400,000 members try to sharpen their investing skills by managing virtual portfolios. Rooted in an open source philosophy that seeks to "democratize access to the best investing talent," kaChing takes aim at the mutual fund industry, which it claims isn't sufficiently transparent:

"The mutual fund industry is a $10 trillion industry that has seen no innovation for 25 years. The Internet has had no impact," Andy Rachleff, kaChing's CEO, told the
New York Times.

Starting today, kaChing will allow users to invest real money on the site. Clients can choose any of the site's "Genius" investors to follow, and every time the investor makes a trade, the user's account mirrors it. The Geniuses -- currently there are about a dozen-- are site veterans who have earned a high "Investing IQ." To determine Investing IQ scores, kaChing imitates the methodologies used by Ivy League endowments, which it notes outperform the S&P 500, by using a formula that measures risk-adjusted returns, the caliber of the rationale investors use to back up their approach, and whether they are consistent with their strategies. Every money investor's portfolio on kaChing is public, and users can choose to receive a notification every time favorite money managers make a trade or post a research update.

Now funded by big-name investors including Netscape's Marc Andreessen and OpenTable's Jeffrey Jordan, kaChing requires a minimum investment of $3000 to mirror any one investor. The site makes money by charging a management fee of 0.25% to 3.00%, depending on the money manager, who gets three quarters of the fee. Users are subject to an additional trading commission of two cents per share.

Even during a recession, kaChing's executives and investors think they can capitalize on the free flow of investing knowledge, and they have high expectations for their service. "Hopefully," Carroll told GigaOM, in the next couple of years "you'll see our ticker on the New York Stock Exchange."

Comments

[mcmutter]

For all you suckers buying mutual funds....the vast majority of mutual funds fail to return even 7% in most years and are not worth the risk or the management fees. Look into an ultra low expense Vanguard Fund like VTI, or a broad based ETF like SPY, or DIA.

[steppenwolfsayshi]

Sounds a lot like Forex. A confusing rip-off.

[ImissBush]

change=kaching

[ibsteve2u]

Should make all of our publicly-held companies' C-level executives take the MMPI, and then weight that in to the rankings of their stocks, too.

That is where our corporation - our stock market - our economy - our nation - gets into trouble; the larger organizations hide the sociopaths at the helm.

[James Brown]

Anyone remember that outfit back in 1999 or 2000 that put there trades on the Internet in real time and had a video feed to watch the traders at their desks?
Went as bust as disco...

[Philclock]

No thanks, I'll stick with cash and keeping away from Obama's tax gestapo.

[RTIII]

2%er, eh?
.

[TJCole]

Yeah I think I'll start one too, and call it Bada Bing Bada Boom..!