Wikinvest's Mike Sha on How Crowdsourcing Produces Better Investment Advice

"When it comes to investments," Wikinvest CEO Mike Sha mused in the DailyFinance studio, "there's this overwhelming sea of data out there. One of the challenges that a lot of investors have is really kind of wading through that information, and trying to understand what matters and what doesn't. Part of our approach is to actually pull in a lot of information but then try to synthesize it and present it in ways that are meaningful; and at the same time, hopefully we're cutting out a lot of what users don't have to pay attention to."

Wikinvest is an online research portal and portfolio manager featuring user-generated content on stocks, companies, and economic topics. In a February 2008 interview with the Financial Times, the co-founders expressed vast ambitions for the company. "We want to be huge," said Sha, a former manager at Amazon.com. His partner Parker Conrad elaborated: "Eventually, we want to offer coverage of more stocks than Goldman Sachs, Lehman Brothers and Bear Stearns combined." That aspiration would soon become significantly easier to realize: Bear Stearns collapsed the following month, and Lehman was gone by the end of September.

The financial crisis focused attention on Wall Street's opacity and propensity for underhanded dealing -- to say nothing of the resultant market volatility, which forced investors large and small to scrutinize their assets with renewed vigor.

"There's always been this inherent conflict of interest," Sha says of the Too Big to Fail financial institutions, where in-house research departments and investment banking divisions provide opportunities for collusion. By contrast, the wiki format allows users to collectively assemble truly unbiased material for consumption by retail investors.

Faster, More Robust Analysis

Wikinvest's intention, according to Sha, is to serve "normal people with investment accounts who need better tools that aren't designed for the day-trader or the super-wealthy person. If you've spent a lot of time looking at financial institution websites, a good portion of them seem to have been built a very long time ago."

Toward that end, the company plans to introduce a new product later this year, a kind of electronic investment adviser built from analyses of a vast multitude of user transactions. "Imagine a system where you have a huge computer analyzing your accounts, comparing millions of different options and different combinations," Sha explains. "I would venture to say that that analysis will be a lot more robust, and will happen in a lot faster of a transaction time, than, say, if you hired a financial adviser, and that guy was supposedly managing your account."

Watch Mike Sha discuss transparency and opacity in the investment industry, as well as some of the hidden costs of doing business with a brokerage:

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