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61

Hi Marco, I see what kind of simplicity you mean now, my apologies.

For that target, other that burning boatloads of cash on marketing and publicity quickly to gain market share and acquire users, I think you are very right on simplicity. One important difference I see is the number of solutions/products. There are many R2Gs and for a new user without experience, selecting one might be difficult.

Here are my two cents to target that market:

  1. Split P123 in two sites, as other people have also pointed out before. I would imagine that the users that use R2G and the ones that design models tend to be different, there are some that do both, but I would imagine that most are either one or the other. I might be wrong, please correct me if I am, you have the data and it would be interesting to know.

In any case, I would split it because the new target customer, needs a very simple solution/interface, and having both can be confusing and create an initial barrier (I am thinking of the index/entry site in particular, and the first impression created by the two concepts shown in it).

The new “R2G” site should have a very simple start/index page. It should have only a maximum of relatively basic but robust R2Gs shown, I would think maximum 5 R2Gs with very simple names, (i.e. Defensive, Growth, Dividends, Value, etc.) Designed by P123, with high liquidity, and relatively simple rules. Rules should be public, in the same way that the robo-advisors explain what they will be doing. What P123 is offering is doing the work for them, not a revolutionary secret formula.

This way a user would arrive at the site, see 5 to invest in and be able to choose one or more, subscribe and get the orders or get it together with automated orders with TRADE if he/she has an IB account.

You could then either monetise this with a monthly fee that would give you the buy/sell orders, or a monthly fee that would include TRADE, or per strategy monthly fee + TRADE/month fee. There would be different ways, I would keep it as simple as possible, preferring one all in fee that includes the 5 P123 models and TRADE.

This will probably not make many R2G designers happy but… here it goes, it’s just an idea, and in the long term it should benefit R2G designers if more users join the platform.

The site would then have a section “Advanced” where users could subscribe to the current R2G’s offered by the designers. It could be mentioned in the index/entry site that there are third party systems designed available, but I would not delve very much into it, because it could create a first impression of complication. As a result, a non-registered user (who is probably thinking about registering or not) would not have access to the third party R2G’s. Once the user is through with the registration, and understands what an R2G is and how it works they can have a look at the third party ones. If I am a user thinking of registering, at the moment, when I arrive to the site that has R2G Model Categories, once I click on one category, if this is my first time on P123, the sheer number of R2G models is confusing, it just takes too long to choose one at first, and that is a barrier, its like a menu with too many choices, people have a hard time ordering. Instead, I think it would make it much more appealing to have a 5 options menu, and then, once you sit at the table and you are relaxed and have had a glass of water, there are special house dishes if you wish.

I hope al this mumbling helps.

62

All:

   Given Fama, French & momentum and say a 2-4k stock universe: How many stocks are there at 99.5%+ ??. 

   P123 is great, but it doesn't naturally scale into the trillions. Billions are a big question.  My point: There are natural limits, and this means there are choices that need to be made.  I would like them to favor paying customers over free-loaders; existing customers over potential new ones, and core functionality over advertisements (like user-interface etc.).

   I think this is the path to long-term sustainable (albeit slower) growth.

Bill

63

Marco,

“Steal” the asset allocator’s idea. Have books with various asset allocation ideas. For example, make an “allocation book” with 50% bonds and 50% stocks. Then let them insert their preferred stock and bond-ETF ports into the book.

You can legitimately make it sound as official as say Vanguard:

Target Book 2020
Target Book 2025

Have them fill out a question are about age, risk tolerance etc. as we have all done.

I do think a different site or advanced portion of the site would help to focus on attracting retail investors. R2G subscribers will be different.

Just an idea.

64

Steve,

Exactly! So we do agree that there are no real danger that $1M investor will ruin the R2G, at least no such intention present. So why $1M investor should pay more than $100K investor? This was my point. And yes, this “That is the point of limiting the free P123 membership to largecap models” is, in my view, the appropriate option to figure out possible problem.

65

All,

I made this from web caches, so there still may be missing parts, at least one topic missed some screenshots, but do believe this was minor topic on basic Excel file review. As Steve made this public I will attach this manual to this message from my google doc for ease of use.

Marco, if we call this COMMUNITY, why such a manual are not in the list of the Help - Community Tutorials?

Ranking System Optimizer Tutorial.pdf (3.09 MB)

66

Konstantin - why don’t you contact Rolex and ask why you can’t buy a watch for $14.95? After all, it only tells the time like every other watch.
Steve

67

I would like to propose an idea.

How about P123 create an actively managed custom universe of LargeCap stocks? P123 members would be able to pay a monthly price for the custom universe and use it in ports. P123 could also arrange for basket-trading or mutual fund style investments for subsets of the custom universe, based around very simple themes such as high dividend (income) stocks, best EV/EBITDA, etc. The so-called free P123 members would be able to invest in these baskets or funds.

So how does the actively managed custom universe get created? Here is where the fun begins…

Each and every paying member of P123 would be allowed to identify 50 largecap stocks they believe will outperform for the next quarter. The selection of stocks can be manual picks, via a screen, etc. - however the P123 member so chooses. Over time the P123 member will build up a score based on how each of his/her stock pick performed in the subsequent quarter.

P123 will use the member scores to choose which member’s picks will be in the custom universe for the next quarter, perhaps the top 10% or 20%. In return, P123 members will get profit-sharing of the revenues generated by this concept, weighted by their score.

Presumably, the custom universe and basket subsets will outperform the general indices and P123 can use this as a marketing tool. This is something along the lines of what Marketocracy did.

Steve

68

Steve, i like this idea like a lot of others shared here on forum. But, from that can I see at the moment, there are a lot of problems in the P123 core to be sorted out before all such ideas could be run safely and smoothly.

It sems you’ve missed prehistory of my question so misunderstood it. The difference NOT in the PRODUCT, the difference in a CUSTOMER. In you example this will sound like: why customer with $1M in the pocket should pay more than other with $100K for the SAME Rolex? This make sense from marketing point of view, that is OK, this is what I call “artificial” segmentation on P123. But hey, whose with $1M in a pocket not an idiots and they see this pricing difference. Is it fair from customer point of view? Surely NO! What about Seller side? This is tricky question. While a lot of sellers would be happy to act this way I sure no one would like to explain this to customer personally.

I see a lot of ideas, good ideas for P123 to develop and growth. Lets ask the market. I think Marco put it right on the previous page: P123 interesting to the 0,01% as a designer oriented project. Looking at the investor perspective there are a limitations too: how many investors or invested capital can P123 accommodate at the moment? I am afraid the number will be less than 0,01% (of world investors). Are there answer how much they will bring to P123 in fees? Is it sufficient? I am not saying this is impossible or not profitable, but there should be numbers behind. And there is a lot more difficult question: do we have proved sustainable alpha here to offer? I know, I know, I see a lot in stats, even in OOS. That I can’t see is an investors interest. The market seems do not believe.

BTW my Idea to make a scientific part of P123 there we can prove that sustainable alpha exist and achievable with managed risk.

69

Konstantin - I understood what you were saying. But P123 makes the rules, so if they say for $0/month you can have a book with a starting capital of $100K. For $50/month you can have a book with starting capital of $10M. This makes it a different product and the rest is supply and demand. Just like Rolex could color one watch black and charge 10x what they charge for a yellow watch. They don’t have to justify the difference in price. Is it ethical? Well, just ask any hotel in Canada. They charge one rate for government employees and a lot more for everyone else. Same product, different price.

Steve

70

The Rolex analogy doesn’t quite fit. Rolex figured out the right price so that it’s exclusive, but they don’t care if the wearer is a millionare or a billionare.

In Finance size matters a lot, and not only because of market impact. Here’s another way size matters:

A wealthy individual that chooses P123 to manage their assets will likely fire their advisor, which in turn has to cancel their expensive data subscription. The data provider just lost a customer, so they will raise the fees to P123, which in turn has to raise the fees for everyone. But now the $50K investor can no longer afford it and cancels P123. And the wealthy just get wealthier.

71

Sorry, haven’t had time to read the whole thread.

I think I would be tempted (if it were my business) just to keep things as they are - essentially entry level design/taster, full designer etc. and simply add a free R2G subscriber membership on top.

EDIT: I would also add that a clear definition of one’s market and competitors is key in deciding development. You may decide that the wider market incorporates those people who simply sign up to managed funds and the like for simple subscribers and consider how best to meet their needs. I think people who are tempted towards design are a fundamentally different group. It pays to keep them quite separate I think in considering how to meet their needs.

And it is not entirely clear that the bulk of designers want the hassle of running R2G systems. I don’t know how, but maybe offering a hassle free service to some of the best designers to put their systems on R2G may be a worthwhile service to offer.

EDIT2: I think one issue r2g potentially faces is ‘free’ models. There is a saying that there is a ‘heavy price to be paid for free’. It restricts one’s ability to invest and attracts a lot of people who just won’t pay a bean. I can understand why people want to give their models away for free and it can be a good taster for subscribers I guess.

I think what I would do is charge a minimum nominal fee, and perhaps introduce a simple a minimum tiered fee structure imposed according to an agreed set of metrics. So you end up with a theoretical and logical structure of people paying more for ‘better’ services (I’m glad I don’t have to design that but it should broadly follow the decision making process an individual goes thru’ anyway in deciding whether to invest in a fee paying model anyway). If designers don’t want their fees, then this could be given to P123 for investment purposes. The better the model is in this circumstance, essentially the more P123 would charge and raise in income.

72

Steve, Marco

This is for sure. I just appreciate Marco is listening to community and feel responsible to make P123 better. That is why I am questioning things I don’t understand from my experience. This is not a call for revolution or smth., this is open discussion.

This is more of the theory. I can add: data provider rising fees can lost clients too so will think twice. And $10M investor will get the same relative return as $100k investor, will be taxed the same way and smaller capital client will get more public services return on the taxes payed.

Reality is different. There is no obligation to declare invested capital on P123, so it is possible to hide it and easily pay less. $1-10M was just an example, there are a lot of investors with $100k-$300k capital. Does anyone feel they should pay more just because of this larger capital? And finally, do someone know ONE investor who upgraded membership just because of capital restriction?

I am not advocating large capital. I just think that large capital have their larger managing problems and need more paid services and can/will pay more for a real reason, not for artificial one. If to get back to there I begin I see no huge problem with this for big investor. I see problem for P123 offering complicated membership plans with obvious artificial limitations that I believe does not add to reputation.

73

I was skeptical, and I still am, with expanding just our present model. Do expand the present model.

But if you start with asset allocation, large liquid models with 15 stocks or more and tax favorable strategies, you should attract a lot of people. There is a huge world of people that think rebalanacing once a year is a lot. These people might really benefit from automatic trading. If you convince them that they can have conservative, tested strategies with reasonable fees, I do think there is an–at present–untapped market.

A new area (free site) for the people at Vanguard now (and perhaps AAII) who aren’t hardcore believers in the efficient market hypothesis but have no way (now) to be stock pickers. BTW, I think a lot of those people at Vanguard will never consider hiring an analyst and-- whatever they do–will want to keep a feeling of control and understanding of what they are doing.

I know Marc does a $3 stock model but even he sounds pretty conservative in real life. Even Andreas (Judgetrade) seems really conservative with his 100 stock diversification. Maybe the free site will not need a wealth of micro-cap 70% annualized return models: but we can do that too.

Give the site (area) a Wallstreet, conservative broker feel. Make Profiles (with a small fee) a prominent part of the site.

FWIW

74

It looks to me like P123 is trying to figure out how to grow their business without adding any extra costs or overhead. Good for all of us.
Since P123 is thinking of making a de-featured tool free (therefore foregoing subscriptions on the tool itself), I am assuming you are trying to get more retail users to use R2Gs because P123 feels an R2G model-in-a-can will drive P123 revenue/profit better (than everyone trying to create their own). R2Gs are a step in the right direction because 99.9999% of potential retail users have no confidence in their ability to bet their own money using a model they created by themself. R2Gs can fill that void.
But how to connect with these tens/hundreds of thousands of ‘new’ retail users?
In addition to what P123 is doing now, my suggestion would be for P123 to proactively have an outreach program to all the right investment advisors who could use P123 and also promote it locally. Maybe RIAs could be a channel (I am not one). In Hawaii, there are less than 100 RIAs, for instance. A small, manageable group. I am sure they have wealthy clients who don’t want to deal with individual stocks but who do want the potential returns that a custom R2G can potentially deliver. If motivated and educated, these RIAs can be the evangelists who slowly get the word out by both explaining its use to their clients as well as just using it themselves on behalf of their clients. Maybe RIAs are not the right distribution channel but I think the current R2G developer community is not the right one either for this type of outbound marketing. People need to feel much more comfortable with the idea of trading individual stocks and some use RIAs (or the like) as trusted advisors.
Maybe you could use your current R2G developer community (which seems to be world-wide now) as a way to locally teach RIAs how to use P123 and (maybe act as local consultants, if they want).
I just joined a local investment club that is run by an RIA and I was shocked to see they are using AAII’s StockInvestor Pro (for initial screening) as well as a tool from Bloomberg (their primary tool). They were amazed by the capabilities in P123 when I demo’d it to the club. I have used SIPro previuosly so know the benefits of P123 compared to it.
As another comment, I use Vanguard for trading and my ‘banking’. They have a crappy stock screener. I’ll bet a lot of people look at their screener and try to use it. Forming a partnership with Vanguard, Fidelity, Schwab,etc could get a lot of visibility. I cannot image these companies seeing stock selection as a core part of their business, especially for fund companies. They want trading fees or fund sales. People seeing your tool and getting familiar with it can drive more traffic.

Making something free can help but only when there is existing pent up demand. Creating that demand is the trick.

P123 has been around for a while so maybe you have already tried all these things. My 2 cents.

75

All:

tkp: I do not agree there is little danger from the $1M investor.  I have seen systems ruined by overexposure before.

There are limits and therefore choices to be made.  My hope is Marco will choose wisely, and be respectful of the interests of his long-term core customers, without which, P123 probably wouldn't have been able to weather the financial crisis.

Bill

76

Once again, I am fine with users that get free Access. The Designers of r2g can market their modells much better, simplicity and usability is key in conversion,
so fare you Need 2 steps in order to subscribe an r2g, if you have not subscribed to a p123, 1 step is much better.
The world is complex, nobody knows what will happen, if it works, push it, if it does not, Change it again.

From what I see, the community is rather conservative when it Comes to Change, this is totally normal (I see it every day at work, I run a huge
Change Project and a growth Story at the firm I am working) and invested IP should be protected (e.g. stable data Providers are key).
But other stakes? I Argument for r2g and free users maybe only because I want to sell more seats.

At the end of the day, I trust Marco and his Team, p123 gives so much value, it live changing to me in a very positive way.

p123 does a great Job, the direction is fine and I think it is fine to Change boldly.
Amazon only develops agile, they test, test, test and ship new Versions of their Software every our and see what works and what does not.

One cracy Idea for the free r2gs: The Provider of the free r2g could give a second Price tag for the model, it would be free if you have a Membership and it could cost (maybe at least) 20 bucks a month or more. This could get more users into p123.

Andreas

77

Bill, thee IS danger of over-investment into model, that is true. My points are:

  1. There is very little probability of over-investment into model as large investor do understand the risk more than small investors. Most probably they know this from experience. There is need of diversification too.
  2. There is NO effective tool to manage this out. P123 limitations are easy to override.
  3. There is NOT actually possible to figure out capital size invested into model.

I see no use of such capital limitation, but see artificial membership leveling limitations not adding to P123 reputation, but definitely annoying investors with $200-300k capital. Let’s not dream of mass $1-10M investors, this was just an example.

BTW, I don’t see such a worry about more probable danger for models with the same outcome - over-subscription!? :wink:

My proposal to keep models alive would be to let models self regulate like it should be on open market or let designer regulate by subscription price/slot factors.

And let’s not forget, this is only one small question, see no reason to attract such an attention. I am not requiring/begging/asking for changes, I just questioning and reasoning. In the end of the day, I was thinking we are fighting here for more clients to P123?

78

Konstantin - I’m not really sure what the problem is. We are talking about bringing new members to P123 in a more streamlined fashion. The free version should be a small sample “get your feet wet” kind of affair before spending a lot of money on P123 memberships. Potential members with lots of money don’t give diddly squat about a monthly fee. At least that is my opinion. My experience has been that the people with lots of money want to be where the action is, know who the best designers are, and want to tap into them. They don’t want black box R2G models because they need some level of control over what they are investing in. This is a different market than the small time investor trying to get started. And the idea of imposing a $100K starting capital limit should be a deterrent for current members wanting to take advantage of free memberships.

Steve

79

Steve, it seems that problems is we are talking about different things. While you are talking about free membership level and $100K capital limit, which I see for the first time, but I do fully agree on this (still skeptical on how to control this, but let it be)! I am talking about capital restrictions for current payed membership levels (Investors, Screener etc.) and sharing my experience on upgrading: what moves and what stops.

80

AH OK - sorry for the confusion.
Steve