Launch HN: Enombic (YC S20) – Create your own stock indexes
With our product, you could, for example, remix the ARK ETFs (https://enombic.com/13F/ARKK). Or, you could apply portfolio theory to the most popular WSB symbols (https://enombic.com/mandelbrot/wsb-MPT). Also, everything is nestable, so you can put all of the above together (https://enombic.com/aml/diversified). Then, it's one click to invest. The investments can be one-off, or on a recurring schedule.
We started Enombic because we're personally really fascinated by financial markets. Driven by curiosity, we wanted to hack on different investment ideas. We couldn't find good tools for portfolio and risk management, so we decided to make some. We started doing this work with Python scripts, and sharing it with our friends in group chats. Then we'd wrestle with existing products to implement the strategies we had developed.
Eventually, we built a proper web app to make this easy. A lot of our UI / UX is inspired by Github. For example, we built version control and advanced permissioning into the indexes.
The ubiquity of zero-commission and fractional-share trading means that diversification and customization is easier than ever. This allows you to think about investing into a curated portfolio, rather than picking stocks for individual companies or subscribing to popular ETFs.
We've had users do things like build their own robo-advisor, reweight SPY to fit their existing portfolio, and construct sector-specific indexes in their area of expertise (e.g. gaming, enterprise SaaS, and e-commerce, to name a few).
Enombic is free, but we're rolling out a series of subscription-based premium features.
We would love your feedback on what we've built so far. Happy to answer any questions you may have. Thank you for your time!
211 comments
[ 3.2 ms ] story [ 257 ms ] threadAre you a brokerage or is this something that can hook into your existing brokerage? The latter would be awesome.
We are currently the latter; we're powered by existing brokerages, but are working to become our own.
I was thinking a lot about this idea lately. An API/programmatic-first brokerage/trading platform. Let people design automated trading strategies on top of solid APIs, and use your site for visualization/planning. OptionAlpha seems to get into this but not nearly far enough. Latency wouldn't be critical either for retail investing.
I don't really understand why it doesn't exist. IB is probably the closest well known broker. There are some other smaller ones with better APIs.
Also agree, re: API tooling. We'd love to find folks who want to write code against our API. Is that something you'd use?
That's definitely what I'm thinking. There are so many tools out there to visualize strategies, profit/loss, scanners for various properties like IV, open interest, volume, etc in the case of options. But very few platforms go to the next level and provide good APIs to manipulate. It would be extremely impressive to offer both data and trade execution via modern APIs. I've wondered if that's an untapped market, or else why someone hasn't jumped on it :)
Right now each index will track the latest version by default but we're thinking through something similar to version pinning with software dependencies. E.g., something like jdoe-index-0==v2
Id love to provide feedback, but it seems i'm waitlisted when I sign up. Is there a HN-skip-the-queue?
I guess you're encouraging somewhat diversified stock picking, but honestly I'm dubious this is a 'good' idea for expected outcomes.
If you want to stick to more traditional indexing approaches, that’s supported. For example, one user has stayed very close to VTI, but made some modifications to customize VTI to her goals and existing portfolio (https://enombic.com/abby/VTI-15).
We also have some users who want an easier way to automate their investments into a classic Vanguard basket (https://enombic.com/aml/lazy).
Everything on the app is DIY. So, alternatively, if you want to be more active, and test a thesis you may have, that’s supported as well.
So it could be argued that you're essentially presenting choosing individual stocks, a highly risky investment strategy, as index funds, a different, much more conservative kind of investment.
Risky investments are the same. We don't need overbearing protectionist policies other than to ensure people aren't being outright cheated/scammed.
If the kids want to YOLO GME, who are we to say otherwise.
She weights APPLE at 18.7% while VTI weights VTI weights the top 10 holdings for a total of 23% of the portfolio.
The default investment should be "the diversified market portfolio", e.g. S&P500. Then, if you have opinions (especially negative ones) about companies (e.g. if you are a perennial Tesla bear), you want to invest against those companies. A regular way to do that is to short. Shorting is hard and expensive for retail. A better way to do it is to buy everything in the S&P500 except TSLA. The way to do this is to construct a custom index that is identical to S&P500, except that TSLA is removed and all other weights are adjusted accordingly.
If you have no views, you match the benchmark (a good start- that's what you get judged by!), if your views are good (more x, less y) you make your alpha. Excellent. If your views are bad, said alpha is negative. Sad. But you probably retain a high Beta to the benchmark index.
My view remains that stock picking is bad for the average retail investor. Custom indexes are just stock picking with bells on.
Rank all the public equities by revenue, select the top 500, then weight them by market cap. Sounds pretty arbitrary doesn't it? Why not rank by profit? Or weight by years in existence?
Passive investing logic is simple. You want to invest in stocks. Say you want to invest in the US market. You want a portfolio that represents, to some extent, the market. How do you get that? There is a benchmark index that weights by "how large a proportion of the market is". That seems pretty sound and consistent with the ideal?
The issue at hand is an attempt at rebranding a micromanaged portfolio as "index investing" - a term used interchangably with passive investing.
I don't mind stock picking. It is a negative sum game and people can play it if they want. But it is irresponsible imo to pretend you are offering something other than what you actually are
By definition, the S&P is a relatively arbitrary arrangement of stocks. These are picked by an arbitrary rules based algorithm. I happen to pick a lot of them, so the end of being well-representative of the total market, but that’s just a fact of me picking a lot of stocks. This is picking stocks - or stock picking - just straightforwardly.
Passive investing to me has nothing to do with the total market except indirectly. The goal with passive investing as I understand it is a portfolio you don’t have to watch, or a portfolio sufficiently uncorrelated between components to be relatively stable.
Even investing in the total market is active investing in a way, because you’re choosing equities as opposed to commodities, derivatives on those base instruments, real estate, and so on. The Dow is only 30 hand picked stocks, but it correlates pretty well with the total market, is that stock picking?
I get what you’re saying though, my point is just that the distinction between passive and active investing isn’t so cut and dry, and shouldn’t be used so dismissively.
We are exploring a few different models for rebalancing. One is to rebalance with new contributions only, another would be rebalancing with each investing (through both buying and selling), and the third would be a more tax-aware rebalancing where it only happens quarterly or annually (perhaps after you've locked in long term capital gains).
Since we lean prosumer / DIY platform, we feel like perhaps we should support a few models. Curious which you'd prefer?
How do you approach security? I’m guessing a lot of work went into it, but some details would be great for a curious customer like me :)
Brokerages handle your account based information, but we generate additional data around your investments to help give you a richer picture into your portfolio performance.
One particularly fun part of our data structures is the indexes themselves, which are all nest-able and fully versioned, creating a rich graph of historical performance data. Looking forward to exposing more features around this in the future.
Our tech stack is react, nextjs, swr, python, aiohttp, redis, postgres (& timescaledb), k8s, terraform, aws.
Additionally, we're interested in side-by-side comparisons as well, similar to a code "diff" on Github. So you can see how your modifications changed performance relative to a past version.
We'd love to get your feedback on this. If you have more thoughts, feel free to reach us at hello [at] enombic [dot] com
I've been DIY'ing exactly this full time over the last year. Rolling out my own system using Polygon and IEXCloud for market data, DolphinDB and Shakti for time series processing, and Pandas/Dask for verification and parameter optimization.
I totally underestimated the magnitude of the problem, so I'm really looking forward to trying Enombic.
Given my frustration with the DIY approach, I started evaluating some prosumer tools a couple of weeks ago. One of them uses Morningstar data, and the other uses FactSet data. They are in the $100-$200/month range. I had some decent success building statistically sound models to the point where I'm considering dumping my DYI toolset and pay for a ready-made solution.
One of the alternatives has an active forum and community that even sells subscriptions to the user models. I bet you can tap this for your own good. I won't share their names here to avoid crashing your launch, but I'm happy to chat over email if you want to learn more.
Some of the questions that I'd ask myself before putting my savings on autopilot on a system like Enombic are:
1. Where is fundamental and price data sourced from? Is it free from survivorship bias? Is it point in time? 2. Can users backtest/simulate their ideas? How do you help users from curve fitting their models?
Anyhow, I'm on the waiting list now and would love to evaluate Enombic and give you my feedback.
Indeed, there's a lot of opportunity cost in building and maintaining the tools. If you're interested in investing, you probably want to spend your time on investing rather than migrating databases all of the time etc.
We're quite interested in learning more around your suggestion. If you're comfortable, feel free to ping us at hello [at] enombic [dot] com. Would also be happy to chat more about data sources and our roadmap.
- Is it possible to make indexes of other country equivalents on this platform? Even if those stocks arent listed on US Markets.
- How are the taxes going to work in general if the indexes are actively managed?
- Are the 8949s and 1099s autogenerated for individual users by enombic?
Thanks!
I think that using github-esque features feels like a good in-between from the crazy gamification of Robinhood vs old and sad UX you see at most old brokers.
Are you guys planning on adding options at any point and time, or the ability make more advanced strategies than a basket of stocks?
EDIT: You lose the share link as soon as you click away from the waitlist page, might wanna send an email with it after ppl sign up for the waitlist :)
Great to hear you've been working on some things in open source finance. We love getting feedback from folks who are building in the space. Looking forward to getting you on the product.
Here's an example that came to mind:
If you were convinced psychedelic medicine is going to be huge as a sector, but also feel it's too early to pick winners/losers (and you dislike the expense overhead of PSYK) - great, make your own ETF. You still have sector risk but not 'stock picking risk'.
FYI - this is a great real example, but assumes Enomics can handle the Neo exchange (in Canada, since that's where most of the psych stocks are these days). Like, someone should post this over at /r/shroomstocks for real. :)
You nailed it. We are building for "prosumer" retail investors who have baseline proficiency around these ideas. Over time we'd want to make sure our platform is more generally accessible, wherein we would build out more in-app education.
Indeed, higher-risk sector-based indexing is a use case we're seeing a lot on the app (e.g. https://enombic.com/jake/crypto). Then, we're seeing folks couple decorrelated sector-based indexes into aggregate indexes (e.g. https://enombic.com/chris/main, this one is actually 50% Vanguard ETFs).
No Neo exchange yet, sorry. Do you know if it's possible to get exposure to psychedelic medicine in the US?
This is exactly the use case I've wanted for a long time -- I'd much rather just park most of my money in an S&P 500 index fund. But there are some companies there whose business practices I just find scummy; and if I own stocks in that fund, those companies will be doing those scummy things in my name and for my benefit. I realize there are "ethical" index funds, but somehow their senses of ethics and mine don't match 100%. I'd very much like to be able to say, "The S&P 500, but not X Y or Z."
I'll definitely be looking into this.
Definitely want to mitigate tax burden. Additionally, the direct indexing model does allow for more flexibility around loss-harvesting.
If your target is 50/50 and one stock goes up, you can either sell that stock or buy more of the other one. Only one of those models is a taxable event.
I recently learned of the SWAN ETF, which captures (or attempts to) most of the S&P's return with significantly less volatility. It holds mostly Treasurys, plus options that are in the money if the S&P gains a certain percentage[1].
https://www.amplifyetfs.com/swan-holdings.html
They had to create the "S-Network BlackSwan Core Total Return Index" for it.
[1] They look to buy a year out every six months, but I can't tell for sure; it currently has SPY210618C00265000 (call at S&P = 2650 in June) and SPY 211217C00324000 (call at S&P = 3240 in December)
SWAN ETF is super interesting. Wonder if there is a "long" analog. E.g. comparable motivation and performance.
For example, if AMC is $1 and GME is $1, instead of buying the stocks directly we pay you $1.001 for both and you basically hold the stock for us. If we sell you sell the stock on our behalf and give us the cash and handle the tax forms.
However, if we wanted more GME and GME's price fell in half to $0.50 and AMC's price doubled, the new prices are GME: $0.50 and AMC: $2. It would be awesome if we could "trade" our AMC for 4 more GME without having to pay the gains on the $1 we earned on AMC.
Obviously you can only delay so much under this scheme, but I'd be willing to pay a slight commission if you could facilitate a scheme legally to minimize the tax burden of trading.
Like Robinhood making commission-free trades mainstream, if you can popularize this that would be good - sometimes if you're holding a very popular bubble stock you don't necessary want to cash out for cash and want to directly trade it for another stock without selling. Unfortunately what I'm describing would require crazy volume to be worth the implementation effort, but it's worth thinking about!
Reminds me of how a lot of centralized crypto exchanges work off-chain. Buy / sell is still taxable though.
That being said, tax implications are really important so we're thinking through what's best for our users with every feature we build.
I believe it's still being litigated, so the legality hasn't been firmly established yet.
Know anyone?
I bet you could lean into the huge and growing ESG ( Environmental, Social, and Governance) sector, because people have very different opinions about what "good" and "bad" are. For example most ESG funds are heavily weighted to social media, but maybe you think oil and social media are both bad? There isn't an easy to access product for that.
We've had users get quite excited about ESG indexes. Especially with "forking" more traditional indexes and removing companies they're not morally aligned with.