Wisdom of crowds

I have been very busy with summer school midterms and other things. The Wisdom of Crowds experiment will start around July 3-5. Im am still dividing stocks into sectors and deciding how many of each to include.

A new project for me: "The Wisdom of Crowds"

I recently finished a book called "The Wisdom of Crowds" by James Surowiecki. To quickly sum it up: He argues that a diverse group of people, having their information aggregated (averaged), make better decisions or guesses than any single member of the group. Surowiecki argues against the constant "search for the expert" going on in our society today. Simply put, the crowd is smarter than any single member in it (even if there is a so called expert in the crowd).

While the book was a bit bland for my taste, it gave me an interesting idea for an experiment. The Motley Fool CAPS site is one of my favorite investing websites. The idea behind it is to let anyone, not just "pros" rate individual stocks. People can rate stocks either outperfom or underperform and also enter their reasoning for all to see. If their ourperform stock does better than the S&P 500, you gain the percentage difference. Every members rating is aggregated and the stock is rated on a 1 to 5 star scale. My experiment will test Mr. Surowiecki's theory, and my prediction is that he will be right. What I plan to do is to create a virtual portfolio comprising of only stocks rated 5 stars. This experiment will go on for six months initially, and I will post a link to the portfolio for all to track once I decide on the number of stocks that will be included. If the portfolio beats the S&P 500 index, then it is a success. I will try to include an equal number of stocks from each industry in the portfolio. It will be up in the next 48 hours. Stay tuned.

Looking for a no risk investment?

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https://www.fnbodirect.com/