Beat the S&P500 and Earn Real Money at UpDown.com

Is it for real? Can you really invest $1 million virtually and earn real money with no fee and no risk attached. Apparently, it’s possible and people are doing it at UpDown.com. In fact, I’ve already earned a small amount of money for beating the S&P500 in January.

UpDown.com

Today, I have the pleasure of inviting Michael Reich, the Co-Founder and CEO of the UpDown.com, for a little virtual chat.

Hi, Michael. Thank you for the opportunity to interview you today. Can you first tell us about yourself?

I have always had an interest in entrepreneurial ventures — I started investing at age 14 and later started a champagne import business while I was doing my undergraduate studies in France.

I first had the idea to start UpDown when I came to the States to pursue my MBA at Harvard (I am originally from Germany). I was taking a lot of finance and investing courses and Harvard Business School, and at the same time I became fascinated by social networks like Facebook, and the concept of wisdom of crowds. I was particularly intrigued by the idea that one could apply the concept of wisdom of crowds to investing.

Now, can you tell us about UpDown.com?

UpDown.com is a social network for virtual investing.

By giving members $1,000,000 in virtual money to invest, we provide a free platform for people to improve their skills through collaboration, competition and aggregated wisdom. In the process, we allow our members to earn real money with zero risk of financial loss.

Specifically, UpDown members earn money whenever their virtual portfolios outperform the S&P 500. They are also compensated for writing stock analysis and referring friends to the site.

Okay, so you have a no-fee web site that pays people real money to beat the S&P 500. Can you share your business model with us?

Today we have a blended revenue model which includes funding from investors, as well as an advertising and sponsorship component that is similar to those leveraged by most social networking sites. Currently UpDown‘s investors are covering the monthly community payouts to members until the advertising revenue ramps up.

Why should people join UpDown.com? What are the benefits? And how can users get the most out of their experience at the site?

Investing and understanding of the stock market is a key factor in maximizing your earnings potential and can be a huge factor in providing a great life for you and your family. Most people don’t realize the power of proper investment and lose out because of fear and lack of knowledge — UpDown.com helps educate consumers about investing in a fun, informative, and compelling way that has never been done before.

For example, if I’m in my twenties and put $10k in a CD returning 3% per yr, after 25 years, I would retire with $20k. If I invest $10k in the stock market which has averaged a return of 8% per year, after 25 years, I would retire with $70k. If UpDown members can do just a little better and earn 11% per year, after 25 years, they would retire with $130k on a $10k investment.

The benefits to joining UpDown are that you get a risk free, challenging and informative online community to practice investing and earn real money without any risk. It also allows you to collaborate with others who share your passion for learning about the stock market and how you can leverage creative investing strategies to make your money work for you!

What is your vision for UpDown.com?

The company’s ultimate goal is to create a hedge fund that mirrors the members’ strategies that consistently out-perform the major indices.

The most interesting and potentially revolutionary opportunity for UpDown lies in the ability to mine data from our community and create new compelling products built upon the aggregated wisdom of our membership, especially those members that consistently out-perform the major indices.

Our ultimate goal is to leverage this data to create compelling products, whether they are financial instruments such as a community based hedge fund, and/or information products for professional investors.

We also plan to expand the business into global markets like India and China, and we are also considering adding the capability for members to trade in other asset classes, such as options, futures, and maybe foreign currency.

Who are your competitors in this space, and why UpDown.com is better?

There are two types of competitors that we see in our space — the larger personal finance websites like Yahoo! Finance, Motley Fool, and TheStreet.com — and the smaller start-ups like Socialpicks.com, Covestor, and Bullpoo.com.

They each have different strengths, but no one is currently offering a free investment platform that allows members to earn money with zero risk of financial loss, like UpDown.

Can you tell us the most money ever made by a single user in one month?

Last month our top earner made $600, bringing his total earnings to more than $2,000 in just a few months!

The amount you can earn is unlimited, but the average payouts really depend on the community’s overall performance — we expect the monthly payout amounts to grow significantly as our membership expands.

Any last word you want to share with my readers?

By arming users with greater knowledge and shared insight to build credible investment track records, UpDown.com is putting more power and control in the hands of the individual investor, as opposed to the investment professional. Because of this, UpDown members are better equipped to challenge the decisions/advice given to them by financial professionals, as opposed to “going on blind faith.”

Companies like UpDown are illustrative of a growing shift in power from the corporation to the consumer, which is the very essence of Web 2.0. As a result of this shift, consumers are now able to “hold the bar higher” when engaging with professionals across multiple industries.

Michael, thank you for your time.

About the Author

By , on Feb 20, 2008
Pinyo
Pinyo is the owner of Moolanomy Personal Finance. He is a licensed Realtor specializing in residential homes in the Northern Virginia area. Over the past 20 years, Pinyo has enjoyed a diverse career as an investor, entrepreneur, business executive, educator, and financial literacy author.

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Leave Your Comment (13 Comments)

  1. Pinyo says:

    @Lily — I agree. I can see people taking more risk than they normally would so that they could make some side money.

    @David — I think the site that might interest you more is Covestor.com. At Coverstor, you could see what others are investing in and these are REAL portfolios.

    @DGI — You get paid at the beginning of each month. There’s a button for you to manually transfer your earnings to your PayPal account.

  2. One thing that I am wondering is when do you actually receive your earnings from updown? Is there a minimum payout?

    DGI

  3. David Evans says:

    Hmm, the guy is smart but does he really believe in the “wisdom of crowds?” Even focusing in on the top 10% or so might be fruitless as statistics tells us chance has a lot to do with it. Not that I believe in completely efficient markets or anything, but I just wonder how they will be spot patterns in the top performers’ strategies in a statistically significant manner. But even allowing that, do you really think the best investors/traders (i.e. those who are making money in real life) would want to share their strategies with these people, especially since they’ll be making more in real life? They’re paying out some money, but in the end, whatever worth your strategy had would be destroyed if they take it to the market with their hedge fund, which, of course, is the whole purpose of this company. Now if they were to offer the top performer the opportunity to become a managing partner of that hedge fund, maybe it’d be a different story. Whatever the case, it still seems sneaky to me.

  4. Jonathan says:

    What a fantastic concept, it’s a great way to get an introduction to the investment markets, I shall be recommending this to my younger brother who is just starting to plan financially for the future.

  5. Lily says:

    I started trading on 2/29 and made 30 cents for beating the S&P 500’s abysmal performance on that day. Woohoo!

    I’m not entirely sure this site encourages smart investing, though. I’m making moves that I’d NEVER make in my real portfolio – including short-selling and day-trading.

    Also, there is still potential for “groupthink” due to the existence of investing groups that post ideas to group pages.

    Anyway, thanks for pointing this site out – it’s been fun so far.

  6. Lisa Spinelli says:

    I think I’ll check into this. It looks quite interesting. A good place to practice for the beginning investor, without getting beat up.

  7. Pinyo says:

    @DebtKid – Wow… you are doing well. I have a pretty conservative portfolio. It’s actually in the negative, but doing better than the S&P by about 1-2%

    @Patrick – Thank you. Give it a try!

    @Adfecto – I generally agree with your viewpoint. I also like contrarian investing and in general never go after any hot investment.

    One thing about UpDown.com is that you can’t see other people’ portfolio, so I think there’s very little “group think” going on.

  8. Adfecto says:

    This concept is interesting. I would have to wonder if there was an incentive for the users to take undue risks in order to try and beat the market in the short term. I don’t know if I would invest real money in a product that has this underlying short term profit focus. I also have a contrarian view that when ‘the masses’ are hot for a particular stock or sector it is usually a sign of a market top. Any fund based on ‘group think’ may tend to chase past performance and buy after a good thing has already had its run-up. This is just my initial impression so hopefully the network will mature beyond herd mentality and speculation.

  9. Patrick says:

    Very nice interview. I think this is an interesting product, and a neat way to learn the markets. I may give it a go. 🙂

  10. DebtKid says:

    I joined updown in Jan. I really like the site, and being an ex-day trader myself, whoever built it knows what traders like. I’m up about 10% for the year, or over 100K. Hmm…wish it was real money!

    Nice interview Pinyo!

    DK

  11. Pinyo says:

    Not much. I earned $3 last month. That said, my portfolio is quite conservative — i.e., I don’t bank on hot stocks to get my portfolio ahead — and I didn’t write any stock analysis either.

  12. FourPillars says:

    This company won’t be in business long.

    Looks like a neat idea until they run out of money – I’m definitely going to give it a try.

    Pinyo – how much money did you make in January on this?

  13. Kevin says:

    Very interesting – I may check this out.

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