Wikifolio – a genuinely social trading and investment FinTech project

Update 30.07.2017: Unfortunately, Wikifolio turned out to be not a genuinely social FinTech but rather yet another attempt to make quick money at costs of retail investors. Here we explain why (in German). But we keep the original post below for historical purposes.

Wikifolio and LS - photo for letYourMoneyGrow.com

Summary of advantages:

  • Wikifolio allows everyone to build a proven track record. If a portfolio meets some simple requirements, an ETF on it can be issued. Technically such ETFs are issued like certificates by Lang & Schwarz and are traded by L&S directly and on the Stuttgart Exchange.
  • Wikifolio adheres to maximum disclosure policy: in particular, for every portfolio they provide complete trading history in real time.
  • Wikifolio is very suitable for the strategies that imply frequent trading since there is no costs per trade (only bid-ask spread and all-in fee of 0.95% p.a.)
  • Wikifolio liberates portfolio management from regulatory cram and lets investors meet the portfolio managers directly (without expensive and dubious middlemen). At the same time the investors do not need to transfer their money directly to portfolio managers, so there is virtually no scam risk.
  • Last but not least, numerous successful traders on Wikifolio clearly disprove the mantra that "nobody can beat the market".

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Calling an R-script from PHP: pitfall with loading R-packages

We continue developing letYourMoneyGrow.com and soon will make the first tool from the promised portfolio optimization toolset publicly available. And so far a small technical report. We implement the core business logic in R and wrap-up it with PHP. Calling Rscript from PHP via exec("Rscript ...")  seems to be easy ... as far as you don't use any libraries. And if you do, you will get an error message like Error in library(RMySQL) : there is no package called 'RMySQL'. Fortunately, there is a solution. However, note that a loaded package may depend on other packages. For instance, RMySQL depends on DBI. Thus you should explicitly resolve this dependency in your R-code like this:

library(DBI, lib.loc = c("/home/<yourUsername>/R/x86_64-pc-linux-gnu-library/<yourRVersion>", "/usr/local/lib/R/site-library", "/usr/lib/R/library"))
library(RMySQL, lib.loc = c("/home/<yourUsername>/R/x86_64-pc-linux-gnu-library/<yourRVersion>", "/usr/local/lib/R/site-library", "/usr/lib/R/library"))

Osram (DE000LED4000) jumps 11% – acquisition offer from China – I sold the stock

osram_led400_filamentlampvsled
According to the news a Chinese company San'an Optoelectronics has offered about €70 per share and the acquisition is "in all likelyhood". Osram provides no comments.

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Gold down -3%, silver -5% – an opportunity to buy?

Well, if you have no position, then likely yes (as usual, start gradually, with 1% or 2% of your trading capital). I bought today, unfortunately a little bit prematurely. If tomorrow the prices recoil, I will halve my position. But I don't regret the purchase, anyway, it is a good diversification for my stock portfolio.

Oil WTI short: why it will likely fall (29.09.2016)

OPEC agrees on oil cut at Algiers meeting ... oil price jumped more than 6% ... a good opportunity to short WTI!

  • OPEC members may agree on whatever they want but it is unclear how they will control the agreement and penalize violators.
  • As soon as price grows the production of shale oil in USA will be increased.
  • The current Brent price is $49.13 and WTI costs $47.69. Respectively, the spread is $1.44, which is pretty narrow (normally it is about $2) so it will likely widen, thus it is better to short WTI, not Brent.
    Yes, there we times as the spread was tighter and even negative, but by those times both WTI and Brent tended to fall.

Update 04.10.2016
So far the oil price keeps growing though I was right with shorting WTI, not Brent, since the latter grew more intensively; the spread is now normal, about $2.
Today it was a price dip, so I halved my position with a minimal loss and keep about 1.5% of my trading capital in WTI short.

The power of diversification and its limits by the example of DAX

Summary

  • Sometimes (esp. to fool inexperienced retail investors) the diversification is claimed to be a silver bullet (even in a financial crisis).  I show that in crises the diversification effect weakens significantly but still persists (esp. for "defensive" stocks).
  • I argue that in a normal (non-turbulent) market the diversification is very helpful in theory but also critically consider its applicability in practice.
  • The results that we obtained for the DAX / German stock market should be extrapolated with caution for other markets. You will also see why it is better to watch and know the market (rather than to blindly rely on quantitative analysis and common sense).

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Stripping down the robo-advisors: sparrow-brains inside

Robo Advisor - Sparrow Brains

Summary:

  • Robo-advisors promise the risk profiling in a few easy steps, which is unrealistic both from mathematical and behavioral points of view.
  • The "optimal" portfolios are usually based on Markowitz-like models, which are inapplicable in practice due to their extreme numerical sensitivity to the market parameters estimation errors.
  • Robo-advisors lure investors with low management fees but minimizing fees and maximizing the wealth is not the same. Moreover, the compound costs are not so small in the long term.
  • A positive side: Robo-advisers do not (yet) foist toxic financial products upon you.

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Numeracy for Traders- Lesson 1 – Fractions

Fractions is a topic from elementary mathematics but surprisingly even some Ph.Ds in math have problems with them. After this lesson you will be able to read pie diagrams, calculate portfolio weights and weighted average returns. This lesson does not substitute systematic learning but helps you to recall fractions and demonstrates their usage in trading context.

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