Coattail Investing: Learning From Professional Investors
We all know the importance of diversification but, with so many investment options and asset types, it’s hard to make good trading and investment decisions on all of them. But we can leverage the expertise of others by “coattail investing” or following and learning from professional investors.
It is true that doing your own research and due diligence is essential for anyone serious about growing their investment capital over time. But tracking and applying the investment moves and information flow of others can identify valuable, emerging opportunities. It potentially lets you get into new investments faster as well.
By following and modeling other investors and leaders across the investing and business space we can also gain valuable investing knowledge and strategies without being finance experts.
Benefits of Coattail Investing
There are three main advantages to coattail investing….
- Validating your own investment decisions – You have stock, fund or alternative asset ideas but leveraging OPE (other people’s expertise) is a great way to reinforce your decision.
- Identifying new investment ideas and trends – Experts often share ideas as they develop in order to get feedback. They also do this to seed interest in others (often after they make a certain investment). In the finance world that’s called “talking your book.” Either way, we can benefit from hearing their (sometimes) new investment thesis.
- Learning from others how to be a better investor – All successful investors are continuous learners and we can be too, by learning from pro investors’ trades and from what they write and share publicly.
So, there are multiple benefits to tracking successful investors, or coattail investing. It can reinforce our own research, identify new opportunities, and help us learn to become better investors ourselves.
It’s also never been easier to track and learn from successful investors.
Learning From Professional Investors
With the liberalization of the retail investment space there has been an explosion of new platforms to invest through (and assets to invest in). But this also means that making informed investment decisions can be more complicated. Fortunately, new resources and tools have become available as well.
There are numerous ways to follow and learn from successful professional investors, and benefit from their expertise.
It’s not just the cost of investing, but access to knowledge that has traditionally held back individual, self-directed investors. And these changes have lowered all barriers to entry, for both public and private market investing.
There are numerous ways to follow and learn from successful professional investors, and benefit from their expertise. Maybe you want to invest in a new technology area, an emerging industry or growing sector, or add a new asset class to your portfolio. It has never been easier to tap into the deep research and investment knowledge of expert investors.
Coattail Investing With Top Investors in the World
Coattail investing can be approached in a few different ways. You can use any or all of these methods, and find tools and resources to support the same.
The most basic is by tracking market and trading trends within investing communities, and using this information for idea generation. A different and popular approach lets you follow the buy and sell moves and portfolio changes of large, professional investors. By doing so you can selectively use that information to drive or confirm decisions with your own portfolio.
A third, less common, method involves directly copying or mirroring the trades of other traders or investors (with a track record of good performance). This last example is sometimes called copy trading or mirror trading. This last approach is less popular for a reason (covered more below) but it still bears mention in an article on this topic.
Investing With the Wisdom of Crowds
There are many trading and investment communities that encourage sharing of ideas, and reports of both successes and mistakes made. Following groups of other, similar investors is a great way to get new ideas and discover positive and negative emerging news or trends.
Sometimes, it isn’t the expertise of one professional but the aggregate wisdom of crowds that can guide investment decisions. Some easy to access finance apps might be a good place to start.
If you have a general investment thesis but are not yet sure which stocks to buy, then knowing the top most invested in stocks on the popular social trading platform Public is a useful data point. A variation on this idea is the “community pies” feature offered at social trading platform Public, offering thematic lists of public companies. These shouldn’t be how you make final investment decisions but can be one way to start the process.
By now, most people know about that certain subreddit famous for wild yolos and insane “loss porn.” In my view, Wall Street Bets is more about fun than learning. Having said that, the memes are sometimes both funny and insightful.
On the other hand, the r/Investing subreddit can be a great place to learn from investors at all levels. But neither of these are structured forums that allow for easy research. A relatively new site that pulls this unstructured data (and much more) into a really usable form is Unusual Whales. The twitter handle (@unusual_whales) is a great follow as well.
All of these are useful in their way. For a more comprehensive option consider some of the other pro-am platforms for crowd-sourced investment insight.
Coattail Investing and Expert Investor Communities
There is definitely value in crowd-sourcing investing information. Finance professionals have even started taking notice of some subreddits and other social platforms. But there are also online communities that can connect you with full time analysts and professional investors.
StockTwits is one of the OGs in the space. It emerged out of ‘finance Twitter’ in 2008. Stock Twits is an excellent (and free) resource for stock discussions and ideas, with millions of active users. It’s also watched, as a breaking news feed, by both institutional and individual investors. The trick is to, over time, find the people that you connect with and then follow them to learn more.
By setting up the stocks and assets tracked, Seeking Alpha sends a constant feed of emails, which acts as a sort of expert headline news service.
Seeking Alpha is more of a financial blogging platform, almost like Medium for finance. Here there are many experts and specialists writing detailed, long-form articles about a broad range of markets and assets. I have tried the premium service (it’s great) but currently just use the free plan.
By setting up the stocks and assets tracked, Seeking Alpha sends a constant feed of emails, which acts as a sort of expert headline news service. Going deep on a story is usually just a Google search away.
In contrast to the above examples, I wouldn’t call YouTube an ‘investment community’. But it can also be a good place to source ideas and access subject matter experts. The challenge here, of course, is to filter out the crap and actually identify people worth subscribing to. And there is a LOT of crap. But there are some channels too.
One excellent example is the ARMR Report, which delivers consistent value. In addition to actionable investment ideas, Brett always stays close to his core risk management principles (something we all should do). Strongly recommended. There are some others as well, which I’ll cover in another post.
Expert Investors in Alternative Assets and Private Markets
The resources above are mainly focused on publicly traded markets, but there are many alternatives you can explore and most have forum sections or comment areas that can be great ways to get timely, first-hand information on a whole world of alternative assets.
Trading View is another traditional community/forum type site. Their Community > Ideas section gives access to a huge pool of insights and ideas. Like those above, there are some excellent contributors but the asset coverage may be the broadest of all mentioned. Their “Sparks” section is another great source for new themes or trend ideas.
There’s great content on equities but also crypto, traditional forex and futures, with a strong focus on technicals (but with fundamentals as well). Trading View also has an excellent charting package and investment screener tool. The premium features, including a desktop app, are definitely worth a look as well.
Since I participate in many markets and assets, it’s hard to keep up with the fast-changing crypto space. An excellent YT channel for crypto news and trends is Coin Bureau. The host, Guy, is great at covering topics in detail but in a very beginner-friendly way. Join his mailing list to get weekly updates on his portfolio, and his Telegram channel for even more content.
The free email updates are a great way to keep track of hot, private companies that are filing to go public. This lets you watch the IPO pipeline, especially for disruptive tech companies.
For private markets investing one of my favorites is Regulation CF platform Republic.co. Here, even non-accredited investors can participate in private investing. There are other platforms, but the diversity of deals here is the best IMO. And seeing which companies are fundraising is, itself, great information flow to inform new investment theses.
For accredited angel investors, the first stop is usually AngelList. The main feature here is the syndicates one can join and invest through. In a way, it’s a private investor version of copy trading (discussed below).
But even if you are not accredited and only focus on publicly traded stocks, AngelList is worth a look. The free email updates are a great way to keep track of hot, private companies that are filing to go public. This lets you watch the IPO pipeline, especially for disruptive tech companies.
As for other alternatives, like collectables, art, etc there are many options (too many to mention in an overview article like this).
Expert Portfolio Tracking Sites
Thanks to US regulatory requirements, large asset managers and investors must report their buys and sells through 13F filings. This data is then made public and can be easily searched through numerous free finance sites.
When you already have a stock idea, it’s simple to check who already is invested (and how much they own). The “Holders” section of most finance site stock pages is an easy way to get an overview of existing investors. For example, this is the Yahoo Finance Holders page for the stock Mind Medicine ($MNMD).
Another site that goes way beyond is TipRanks, one of the OG finance websites. They have multiple, unique (and free) tools. One of the best is their Crowd Wisdom page (here showing $GRAB) that uses data on over 500,000 member users’ portfolios to gauge interest level and allocated capital to a given stock. The Blogger Opinion page ($NET in this example) is a cool way to see overall finance writer sentiment at a glance. They also leverage 13F data in their Hedge Funds page but IMO the next resource below is more comprehensive.
TipRanks offers a lot of free data but that’s because their premium data is so good. For instance, the Hedge Fund Confidence Signal aggregates recent transaction data to give a timely pro view. They also offer a similar Insider Confidence Signal and much more. Check it out!
If you don’t yet have a stock in mind, but want to see what certain investors or funds already have (or had) in their portfolios, that’s also a simple search away. Check out Relational Stocks. Don’t mind the 1990s style web design, this site is packed with great data. You can explore many institutions, funds or whale investors. It also provides historical filing info as well as lots of international markets data.
These are just a few examples, but there are others that present 13F tracker data in useful and easy to access ways.
Coattail Investing vs Mirror Trading and Copy Trading
As described above, the term “coattail investing” should be thought of broadly as tracking and benefiting from the investment decisions of larger or more successful investors.
But there are niche services that do more than just provide information (which you then action on). These services automate mirror trading or copy trading, the process of directly following or copying the trades of others.
Allowing users to buy and sell various assets automatically can reduce emotions but a mechanical (no thinking) approach like this does not help you develop your own investing skills.
A search on “copy trading” or “mirror trading” will lead to many sites talking about systematic trading platforms that allow you to connect your actual trading account and have trades automatically entered along with another trader. These originated decades back in the forex markets, and led directly to the trading “bots” that are regularly shilled in the crypto space. So-called trading bots are bad.
However, one platform that combines traditional brokerage services with social sharing of portfolio holdings and trades is eToro. In addition to the core requirements and social trading features, it also has its eToro CopyTrader, which is one of the most established copy trading platforms. Importantly, it also has a well-vetted trader community and good risk controls available.
Having said this, I do not think that so-called copy trading or mirror-trading is a good choice for most people. Allowing users to buy and sell various assets automatically can reduce emotions but a mechanical (no thinking) approach like this does not help you develop your own investing skills.
It is ultimately up to each person to monitor and manage their own investments, along with their budget and income. Previous experience is valuable but not as important as a willingness to continually learn. And every investment decision and trade is a learning opportunity, but only if we actively do it ourselves.
Investing With Your Inner Expert
Index funds are a simple and reliable investment choice. It’s a lower risk and less complex way to get exposure to the stock market. But there are many other ways to grow our money, and most people, eventually, consider taking control of their own investments.
We live in the world and are part of the global market, just like every other person. And that means we are exposed to businesses, products and ideas. This means that, together with a foundation of general investing or business knowledge, we can develop our own opinions and investment strategies. And we should.
But we don’t have to just fire our index fund managers and go it alone, we can still get expert help. Building on that base of knowledge and individual ideas with expert investor tracking and the experiences of others, you can develop confidence and consistent performance as an individual investor.