How Useful is Open Source Investment Advise?

That most talking heads in the financials services industry have good reason to be humble today is not in doubt. Indeed, it is clear that most advise and products that they developed and earned huge bonuses from were poorly thought through and in some cases plainly silly. However, I am cautious about the Wikinvest, an investment site modeled upon Wikipedia.

I came across that in this NYT article by Claire Miller and are surely unsurprised that a group of people have seen it fit to perform a public service. In spite of their good intention and the related issue of their not being complete novices, I have deep reservations that this site should be the place for any novice to get investment advise.

To start with, just because people paid large sums for worthless advise does not mean that totally free advise will necessarily be better. Unlike some comments in the story, i am less concerned with the minute but real possibility of manipulation of stories to affects stock prices especially since this could happen with any advisory environment. However, I see that the design of the site will allow for a large pool of people to cross check any claims and to relegate persons whose advise is totally preposterous or repeatedly proven as false.

My real contention is that any advisory scheme that bases authority on popularity of advise is inherently subject to the error that comes from rejecting unpopular but truthful analysis. For instance, i am still at a loss why people believe that house prices are somehow immune from price shocks. To my mind, the rise and continued popularity of the site will reflect the difficulty in finding really good advise whether it is paid for or not. I do not think that this open source method is perfect either.