Marketocracy Compliance Rules

July 25th, 2007

While starting my My Mutual Fund, Genesis, I initially thought that the diversification rules at Marketocracy made it so that you had to invest in about 20 companies. Boy was I wrong! After reading the compliance rules very carefully I realized I made a boo-boo.

Basically the rules can be summarized as:

• You can’t buy a stock so that it will comprise of over 25% of your portfolio.
• No one stock can be over 25% of portfolio assets.
• You must be at least 65% invested.
• Half of the portfolio must comprise of stocks under 10% (this sucks)

Overall, after thinking about it real close, I think I could make a mutual fund work with 10 stocks at a ~8% weighting. If more than half the stocks become over 10%, I’ll just have to rebalance it to stay in compliance with the rules.

Also, as an update to my Genesis portfolio… wow! What a bad time to buy!!! Before the end of the first day of the mutual funds existence, the portfolio was down on the sharp sell-offs that occurred earlier this week. I’ve already managed to lose $40,000. I told you I wasn’t timing the market at all, like I normally would do, as I wanted to get the mutual fund up and running quick, without taking six months before I meet compliance. Well, it sure cost me dearly… I might be meeting compliance right now, but it hasn’t even been a single week and I’m down 4%! Talk about bad timing. To be honest, I’m considering starting the portfolio from scratch and slowly buying stocks I like at good prices… I’ll have to think about resetting Genesis. I haven’t made up my mind.

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