Investing, in all its forms, lends itself to groupthink and follow-ons. Everyone wants to know what everyone else is doing. Did Warren Buffet invest? What does Jim Cramer say? In New York’s venture capital scene, VCs want to follow Fred Wilson. When it comes to plunking down money, most people would like a little assurance that they’re not the only suckers in the game.
Now Roboinvest, a New York startup that raised a seed round and soft-launched in January, has made copycat investing as easy as one click. When someone you’re following broadcasts a trade, you have 30 minutes to copy it and execute the same trade, broadcasting it to your followers in turn.
“Given stock prices can move so quickly, speed and simplicity were the focus when developing the feature, with the action reduced to the single click of a button,” Roboinvest said in a press release.
There are some limitations. Copy trading is only available for stocks and the dollar amount is capped at $2,000. The trades execute according to criteria and limitations you’ve already defined for your account. Roboinvest is an independent application that plugs into traders’ accounts on E*TRADE’s platform. “E*TRADE have essentially outsourced their innovation to us, and I think we’re having a pretty good go at it,” founder and CEO Mike Giles said in an email.
You can see how this principle might lead to avalanche trading. If one particularly influential trader sells a stock and all his or her followers copy it, and their followers copy them, and so on, that stock could have a pretty lousy day. “Remember, trade responsibly!” Mr. Giles wrote in a blog post.