Launch HN: Enombic (YC S20) – Create your own stock indexes | Hacker News Reader

Launch HN: Enombic (YC S20) – Create your own stock indexes

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Hey HN! We're the co-founders of Enombic (https://enombic.com/), a tool for designing your own custom stock indexes, investing in them, and sharing them with your friends. By index we mean a weighted collection of publicly tradable securities.

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!

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Oh man, this is actually exactly something I want. I want to invest in the s&p 500, like an index etf, but I want to filter out companies which I don't agree with ethically. I also want to look at my custom index's performance historically so I can see how well it tracks the overall market.

It is extremely hard to actually do this. There's a plethora of hurdles in the way - you need to get data (I bought some historical s&p 500 data, seemed to be the only way), and then you need to figure out what to do with it too. When you look at a graph on the index, what is that based on? Do they rebalance every day? Monthly? Who knows? I was never able to reconstruct an s&p 500 graph from source data myself as a baseline.

I will definitely be giving this a try.

EDIT: signed up for the waitlist!

Also, a question: Can you use this without some sort of linked broker account? IE, you tell it what you've got, and it spits out instructions that you execute manually? I ask because I'm in Europe, and only the big American brokers ever seem to get proper integrations with anything.

That's great, can't wait to get you on the product! There are a lot of features you can use around creating indexes, it's not required that you invest.

Are you aware of the S&P 500 ESG index?

I think it has mostly been established that these are bogus and the actual companies don't really do much of anything social / environmental.

https://www.cnbc.com/2020/02/26/chamath-palihapitiya-esg-inv...

Anyway, these are ethical concepts and can vary widely between person to person. Some might not want to invest in energy companies at all where as others might not have anything against companies selling oil / cars with internal combustion engines but take objection to a company's CEO being against BLM for example.

There are various "ethical" indexes, but pretty much none of them exclude google or facebook (which would be at the top of my cut-list). I want to do my own individual research on each company, and come to my own conclusions.

I can identify fully with your investing needs and am looking for exactly the same as you - some sort of custom etfs that fully comply with my ethics and morale. Just wanted to mention that :)

There is a product that already does this https://passiv.com

I think M1 Finance is also very similar. https://www.m1finance.com/

Yup I also use M1 Finance. I have my main portfolio that contains multiple sub portfolios. Works great, but the only thing I can’t do there is share it with my friends. I guess that’s the only novel part of Enombic? Although I used Motif Investing in the past to share my portfolio with friends, but they didn’t have free trading.

Anything similar available to UK investors (connects to a UK brokerage)?

There is one and it's even better - trading212.com. Here is an example of a shared pie: https://www.trading212.com/pies/l71F4dJAcqHItmVp4J5uRsVK3fLq

You can share your M1 “pies” with other users. Here’s an example: https://dashboard.m1finance.com/share/H4sIAAAAAAACA6tWKqksSF...

Just tried both of these. Passiv requires me to link a broker account, and doesn't support my broker. M1 is US-only. Both non-starters. I just want to enter my trades by hand, I don't need a fancy auto-buy broker integration.

That’s great feedback, thank you!

We believe we’re differentiated in being both social and prosumer. E.g. we give advanced risk and performance metrics on every index, and are building a lot in-app for folks to collaborate.

For India, there is smallcase.

https://www.smallcase.com/

Love this idea. For the folks in the comments so far who are uncomfortable with the combination of "index" and "picking stocks", I think that's unfair. This is obviously a service for relatively sophisticated folks who (1) want ETFs that don't exist, or (2) want to make minor changes to existing ETFs, or (3) don't want to deal with the ETF fees/overheads for whatever reason (although presumably Enombic will have fees too).

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. :)

Thanks!

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?

> (2) want to make minor changes to existing ETFs

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.

1000% agree. "Ethical" is not restricted to "no guns, alcohol or cigarettes".

fast food and coke (Warren Buffet stocks) kill much more people than all of those combined.

Nice idea, having worked in a similar problem space for a number of years, I have some questions.

- How are you managing rebalancing, what might trigger a rebalance and how do you manage the tax implications of that?

- With a rebalance/deposit/withdrawal are you always a taker in the market?

- What's the custody side of this look like? i.e where do the stocks sit, are they in my brokerage account or are you custodian.

- How are you accounting for dividends in the portfolios do they get reinvested/included in returns?

- Can you manage all types of corporate action like splits, mergers, delisting, halts etc.?

Thanks, would be curious to get your thoughts given your experience in this problem space.

Since we lean DIY / prosumer, our thought is to provide options to the user. Around rebalancing, we're exploring a few options: calendar rebalancing, constant-proportion rebalancing, and rebalancing with only new contributions. Then, analytics to make it clear what is a short vs long-term holding.

Right now we're non custodial, we link to existing brokers. We are looking to become a register broker dealer in the next few months. The fractional-heavy model makes it such that it's better for us to vertically integrate.

Always happy to chat with people about this space, contact info is in my profile if you want to reach out

VTI has an expense ratio of 0.03% or 0.00003.

With free trading I can recreate the VTI portfolio for free. Do taxes and time cost more than 0.00003?

At $10M it costs $300. Depends on your portfolio?

That last one is when reality hits :-)

I'd be worried about the costs. if i buy an 'index' of stocks weighed a certain way, then i guess you guys would be buying those stocks. except the number of stocks in an index is much larger than a typical portfolio. indexes fix this with economies of scale however you do not have the scale as everyone is creating their own indexes. wouldn't the client ultimately have to pay a lot of total transaction costs (even if its no-commission, there is still bid-ask spread) to the point of making the entire exercise inadvisable?

This was my thought immediately upon reading the title. Would love to see what the team says.

"The ubiquity of zero-commission and fractional-share trading means that diversification and customization is easier than ever"

I think what they are relying on is the fact that nowadays you can own fractional shares (so you don't have to spend that much money to own an index since you no longer care about owning whole number units) as well as zero cost trading (so you don't really have costs to maintaining a portfolio or creating one).

Note that in most cases the bid-ask spreads are low (since for major indices there is enough liquidity in their constituents), and as such won't meaningfully contribute to your gains / losses unless you are rebalancing often enough to factor this in(in which case, making an index is pointless).

Have you considered allowing the creators of a popular index to receive a small fee, similar to current ETF commission structures?

Y’all seem like you’re in a great position to create a vibrant community for the next generation of investors, and giving financial influencers a return could help bring people to your platform.

I was thinking the same thing, but couldn't you just look at a popular index and replicate it for free?

Some folks may be too lazy to do that, unless you could automatically update the copy.

In addition to this, we actually have advanced permissioning. So folks can have private indexes. However, we still need to work through what it would mean to invest in an index where you could not see the composition. Not sure on that front yet.

Indeed! We've been thinking through this model, but there's still a bit more to figure out. Our primary goal is to empower the prosumer retail investor.

I can tell you the difference between me being a user and not being a user is this exact feature.

I can buy stocks on my own in different quantities to make my own “ETF” (granted not at fractional share prices)

But if I could bundle it and make a small commission for it, you’d have my business for the rest of my life

Also, what an awesome incentive that would be for me to share your product around with others who would invest in it! I’d literally be getting paid to do it!

That's great feedback, thanks!

I still find a lot of value without commission as my preferred investing style was unwieldy to do manually. I suppose it depends on the complexity of your index. As you approach 40+ it gets pretty time consuming.

https://www.wikifolio.com/ does something similar for the German speaking market. One part is a social portfolio sharing / tracking component. The other is that they create securities from popular portfolios under a revenue share model with the creators.

I find the costs to be prohibitevly high though…

I'd like to offer the counter to some of the support for this idea. I worry that as soon as there is a commision structure in place:

A) The marketplace will become absolutely flooded with copy after copy after copy of $GENERIC_ETF as people are trying to scramble onto some comissions.

A2) It will destroy the community aspect of people sharing ideas just because. This has been seen in a lot of other marketplace areas before.

B) It'll be back to the same problem of losing money to fees - which is the whole point of low cost brokerages and etfs for us poors.

Please, please, do not implement this.

This is a fun idea, it would let anyone be a hedge fund manager. List the managers own money invested, other's money invested, commision rate, associated social media accounts, "risk"/diversification metrics, proportional and absolute gains/losses since inception (for what it's worth). Personally I would still keep the majority of my investments in an index fund, but for a particular kind of person I can see the social aspect is very engaging.

I could see this going terribly wrong with the cult of personality that people are able to cultivate organically being so massive compared to the past.

As I'm typing this out though I realize that there's no difference between individuals wielding that type of influence over people, and the existing power structures who are doing the exact same thing for their own benefit right now.

Same thought from me - along the lines of recreating the "Becky" index from WSB [1] as an actual ETF that people could invest in for ~0.1% fees.

[1] https://www.reddit.com/r/wallstreetbets/comments/b6hvdf/i_in...

There are a few "notes" of WSB on the app. Haven't seen the Becky index yet though!

What do you think of this? They appear to be operational, but with minimal adoption.

https://genesis.vision/

Very awesome work guys. A lot cool things could be done wrt to portfolio optimization. Not sure if you have this already, but being able to specify optimizers (BL model, min variance, EF, risk parity, etc) would be super cool. Like support stuff from https://pyportfolioopt.readthedocs.io/en/latest/

Also classic academic portfolios would be interesting as well, like a betting against beta or a multi factor portfolio.

So much you could do with it really. I've always been of the opinion that finance has failed retail investors, both mutual fund (closet indexers) and the backlash which has resulted with many people only holding a market portfolio, or maybe a (terrible imo) 60/40 portfolio.

Agreed! We haven't brought optimization in-product yet because we want to get it right, but we've been having fun doing things like this more informally. E.g. https://enombic.com/mandelbrot/wsb-MPT uses the markowitz model to calculate its weights.

One of our main goals with enombic is to empower retail investors with more advanced tooling, glad to hear you're sympathetic to this. Would love to chat more about it if you want, hello [at] enombic [dot] com.

How do you like `pyportfolioopt` compared to other libraries? Seems a lot more batteries-included in a good way compared to most other stuff I've seen.

So, most FAANG employees are not allowed to trade in derivates that short sell their own stock, which I figure is half insider trading protection and half ensuring equity compensation actually works.

However, I've often wondered if those employees could still offload some of the assumed risk of portfolio concentration by investing their free investable cash in, say, their own SP499: every company in the SP500 except the one they work for. Though I suppose you'd have to have a pretty big net worth to fully offset unvested shares this way.

I agree, an S&P499 could be pretty handy, especially for people with ISOs instead of RSUs. It's generally pretty simple to sell RSUs when they vest and diversify, but ISOs are more complex. If you can avoid realizing some of the gain, while ending up with S&P 500 equivalent holdings, that would be neat. Of course, that would still be selling most of it.

We have a handful of users with this exact use case!

Honestly the reason I haven't pulled the trigger on this myself isn't the automation, but because managing the dividend reinvestment transactions come tax time would be absurdly time consuming.

This looks great, congrats! For those already using Trading212 in EU / UK, I've built a few tools that try and accomplish a similar thing using their pie features:

• etf4u (https://github.com/leoncvlt/etf4u) scrapes equities mutual funds and mix and match your custom indexes

• trading212-pie-sync (https://github.com/leoncvlt/trading212-pie-sync) takes the information from the tool above (or ay external source, really) and automatically updates the pie's allocation (which would take a long time if done manually)

If and when you become huge one interesting thing you might consider (if legal) is to become very liquid and actually allow users to trade stocks directly without selling to minimize tax.

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!

I think this is not illegal per se, but it's an equity derivative product which the SEC would not approve, since they don't approve CFDs which go a lot less far than this.

This is super interesting.

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.

This sounds sort of like an exchange fund, which are typically used to people who are extremely concentrated in a single stock/position and want some diversification without selling.

https://passiv.com

You've commented three times on this post, and they've all been links to Passiv. Are you affiliated with the company?

RenTech had the same idea and it made the IRS pretty mad: https://www.bloomberg.com/opinion/newsletters/2019-11-13/mon...

I believe it's still being litigated, so the legality hasn't been firmly established yet.

How is this for tax efficiency? Is rebalancing a taxable event? Or can you rebalance without selling by just redirecting new contributions to the underrepresented issues? Over time a buy-and-hold strategy with etfs gives a large compounding bonus since taxes are deferred.

We're exploring several rebalancing models at the moment (calendar rebalancing, constant proportion rebalancing, as well as only rebalancing with new contributions), and trying to understand which folks are more interested in. Which would you be most interested in?

Definitely want to mitigate tax burden. Additionally, the direct indexing model does allow for more flexibility around loss-harvesting.

so re-balancing IS a taxable event right?

It CAN be. It depends how you rebalance.

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.

Only rebalancing by using new contributions would be preferred. My use case is re-creating the s and p 500 exclusive of some issues and with regular contributions for retirement.

Nice, glad to hear it. We lean new contributions as well.

Oh god it'll be amazing once /r/wallstreetbets gets their hands on this. The $WLSTRBETS custom ticker will definitely go to the moon. I would suggest maybe putting more info on the landing page.

Are you a brokerage or is this something that can hook into your existing brokerage? The latter would be awesome.

Thanks! Yes we're looking forward to getting more content on the landing page soon. For now, all the links above are public pages, so you can explore those to see some of our features.

We are currently the latter; we're powered by existing brokerages, but are working to become our own.

What brokerages do currently work with?

Would you consider expanding into e.g. derivatives?

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.

Hey, thanks for checking us out. We want to get the UX right first with our existing feature set, and then consider expanding to more advanced things such as derivatives or options. We'll keep your request in mind!

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?

> 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 :)

Alpaca does a decent job on the API front https://alpaca.markets/

Alpaca was top of mind in the smaller group after IB :) They seem really neat!

Super interesting - like the clean aesthetic of the website.

I realize this questions is super early but it is an important one given the current debacle with Robinhood.

How do you plan on funding the product as you go to market and undwind VC positions? Is this a subscription model, is this going to be something that is funded through selling data on the backend to keep costs low for the trader, portion of trades, MER?

This is a great question that we've put a lot of thought into, since we share the same concerns you do. We currently monetize via a subscription model for premium features, such as unlimited private indexes and access to full version histories of your and other users' indexes.

However, part of what appeals to us about bringing more of the financial stack in-house is exploring innovative models beyond PFOF & MER. Lots of room for creativity here.

Glad you like our site design too. :)

I imagine it will change as the product evolves. Fee structure is always a tricky dance and only really matters once you have product market fit and are taking off. Glad to hear you are giving it early consideration.

My take is being very upfront about how you guys make money then clients understand the model which will likely avoid downstream challenges!

Good luck.

Spot on :)

What does the legal of this look like? Presumably if you are managing others money you’d count as a roboadvisor?

This looks awesome! Congrats on the launch. For a financial product like this, what does your tech stack look like? Do you use off the shelf databases to store account balances for example, or is there specialized tech for that? or does the brokerage handle that?

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 :)

Hey, thanks for taking a look! Great questions, we take security and data seriously. All communication is encrypted end to end (of course), but we also ensure data at rest is encrypted, using KMS & RDS.

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.

timescaledb <3

One thing I notice right away is that I wish there was some kind of description or context for some of these custom index things. Like why did the creator decide on this mix? What's the background? Otherwise they are just lists of stocks.

Yes! This was my first thought. Tell me a little about each fund. Even if you have some familiarity with every company in the portfolio, it might not not be immediately obvious why they are being grouped together.

Love this suggestion. We've got lots of plans for helping folks communicate their thesis & decision making. Personally I like the README metaphor, but we also want to facilitate comments & discussions

Yes agreed! Right now users can write a short description but we want to expand on this. Thanks for your feedback.

Agreed. We're excited to improve this part of the product

On the topic of creating your own index, we’ve all heard of the SP 500, or the Russell 2000 indices, but isn’t it possible to mine the historical data to create an index that has a better rate of return based on one or more criteria such as market cap or P/E? E.g., stocks that fall within this range of P/E tend to outperform the market in a ten year time range. This would be an elaboration of the concept that small cap stock indices tend to do better over time because they have more room to grow, in contrast to the SP500 dominated by FAANG companies that have most of their growth behind them. I doubt this is a novel idea, but I just have not heard of it before.

Absolutely. Would you want to make this index?

Yes, you can buy low-cost passively-managed funds that invest in value stocks, based on objective criteria. One example is VBR, Vanguard's small-cap value ETF, with an expense ratio of 0.07%. There are many others.

Really cool idea folks! Just signed up for the wait list.

Knee jerk feedback:

1. Dark mode & mobile/desktop apps on the roadmap? :)

2. It would be really cool to see some basic social features. Maybe these exist already when you're logged in? I have a few Signal chats with friends that are just full of screenshots of our IBKR apps etc and it would be cool to be able to collaborate/communicate privately with a small group about the construction of one of these ETF's.

3. I had a lot of the same questions about taxes/rebalancing, etc. but I see a lot of people have already asked about that as well, so I'll look through your comments for more info.

4. Where are you based and what's your tech stack like?

Congrats on the launch!

Hey! Great questions/feedback:

1. Would love both, but no specific timeline yet.

2. Agreed, re: social. We have some preliminary social features, but keen on building out more. Most of our users have group chats with friends like you've described (as do we). We want to bring the right parts of that experience in-product.

3. Thanks, yeah it's an exciting part of the product we look forward to building more advanced features for.

4. We're based in the bay area, our tech stack is react, nextjs, swr, python, aiohttp, redis, postgres (& timescaledb), k8s, terraform, aws.

Looking forward to getting you signed up!

This is great idea. I've signed up to wait list. Interested to know period to launch/full access?

Thanks! Appreciate you checking us out. Getting a lot of engagement, we'll be bringing folks in as quickly as we can handle.

What kind of entity is Enombic? Is it like a brokerage? I’m honestly a little nervous of using stuff like this because I’m worried about bugs in nascent software or unproven customer support. This would be a huge improvement over my current implementation: Occasionally loading ma CSV of my positions into a spreadsheet, then entering in buy/sell orders manually with the new calculations. But I put up with it for now because I have faith in my process and my brokerage.

Awesome, would love to use this. How are you thinking about rebalancing and its tax implications?

Great to hear! Thanks!

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?

Signed up for the waitlist. Just a quick question when you say construct sector specific indexes - are these indexes available for others to invest ? So for instance let's say i create an index and show my skin in the game by investing in that index with returns - can others potentially follow suit and invest in that index or even a portfolio ? This is something that I have been ruminating on for a while.

Anyone can invest in any public index. We do have private indexes too (this is a premium feature, where we charge a subscription), wherein only folks you share your index with can view and invest. You can also "nest" others' indexes in your indexes (e.g. https://enombic.com/aml/autopilot).

We don't surface a lot around how much you invest right now, as there are some privacy concerns. But, depending on how things evolve it may be something we enable.

This is a great idea. A few months back I was telling a friend that I would love to make an index based on Senator's stock picks (since it's all public info), but I don't have the first clue on making an ETF/index. Are there any plans to reward people who create popular indexes? As I understand, currently index funds & ETFs can make a lot of money off fees

Thanks! We're excited to help folks work together to level up their diversification strategy for exactly the reasons you shared.

Re: popular indexes and creator incentives, we have lots of ideas in the works. Glad you're interested in it!

This is fascinating. Since you don't have any info at all on the site (at least not without signing up), a few questions:

- Since it's not just for designing the indexes but actually investing them... how? Do you link to a Robin Hood API or something? What trading platforms do you integrate with?

- Obviously a huge part of an index is maintaining desired weightings/criteria, which involves buying and selling shares in order to preserve them. How often do you perform this rebalancing? Daily? Monthly? The very moment a certain "max" threshold is crossed to restore it to a "desired" value? Over a max threshold for some amount of time?

- If I have a particularly "active" index with lots of rebalancing, am I going to get hit with tons of short-term capital gains even though I'm holding the index long-term?

And finally, what happens if automated rebalancing produces a serious money-losing bug? Are investors using your platform at their own risk?

"Obviously a huge part of an index is maintaining desired weightings" Actually it's not. Suppose I have an index that should contain AAPL and TSLA weighted by market cap, with total value $100,000. Say they both have 1000 shares in existence, and on Monday their prices are $100 and $300 respectively. Then my index will consist of $25,000 = 250 shares in AAPL and $75,000 = 250 shares in TSLA.

Now suppose on Tuesday the price of TSLA has increased to $700, so my index should be 1/8 AAPL and 7/8 TSLA. It's tempting to think this means I have to rebalance by selling AAPL/buying TLSA. But that's not right! I have 250 AAPL shares which are still worth $25,000, and 250 TSLA shares which are now worth $175,000. So I'm already at the desired 1:8 ratio.

It depends on the index you're building.

If you're weighting purely by market cap then it's not very important, as you describe. (Accounting for newly issued shares is the only issue, but is often minor enough it can just be ignored.)

But if you're weighting by sector, for example, then it's hugely important, no? Indeed basically any weighting strategy except market cap requires rebalancing as a primary concern.

Super-stupid suggestion, but… why not enhance building indices for given topics? Some sort of semi-automatic creation?

Say I believe in genome editing, CRISPR and personal medicine, and I would like to have XX stocks in my index. Your system could support me by picking the appropriate stocks.

Biggest issue is to map trending topics to XX according companies for me.

Lots of our early users have asked a similar question. We're actively working on search & browse to help improve how you discover and bring together great indexes and stocks, many of which will no doubt be themed. CRISPR is a good example, we've definitely noticed an interest in biotech developing on our platform, e.g. https://enombic.com/aml/biotech.

Another neat thing is to see how the metrics improve when you bring differently-themed indexes together (e.g. https://enombic.com/aml/diversified), since the underlying assets are more decorrelated.

I want to be able to charge a fee on top of my indexes before making "subscribable" by others. That'd attract a shitload of users ;)

EDIT1: Also: are you familiar with your competitors on the crypto side of things? Iconomi, to name one.

EDIT2: Is this available to non-US users? That'd be huge, as we are not able to access ARK directly , to name one

We're looking into this model! We need to understand the regulatory landscape in more detail first. But it's definitely something users are asking for.

Haven't heard of Iconomi, thanks for the pointer! We're not focused on crypto at the moment.

Right now only US users can invest. But, anyone can use the platform to build indexes.

This looks awesome, great idea. I'm drawn to any project that makes more or less inaccessible things programmatically queryable (and even controllable), so this fits the bill perfectly. And in finance, too! :D

Are you planning on eventually expanding to Europe? Or do you know of any similar services in the EU?

This is a really great idea! Is there any reason this is "for hackers" and "like code"? I'm waiting to get in off the waitlist so I haven't seen the actual UI, but is it easy enough for non-technical users to get in and set up their portfolio?

Thank you! "For hackers" is because it's very DIY, at least at the moment, e.g. if you like to fiddle with different ideas. "Like code" is because we've used a lot of our favorite github features in building the UI (version control and advanced permissioning to start). That being said, we've tried hard to make things generally accessible, and we're finding non-dev users don't have any issues.

Would it be able to reproduce strategies that involve options?

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)

No options at the moment. We'd be excited to support them down the road though.

SWAN ETF is super interesting. Wonder if there is a "long" analog. E.g. comparable motivation and performance.

What do you mean by a long analog? SWAN is long the S&P, it just softens the downside.

Few questions from my side:

- 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!

Congrats on the launch Keri & Chris! This is a fantastic concept that I've done on my own throughout the years. I'm excited to see if this will bridge the gap between index funds and previous gen, higher fee, mutual funds.

Thanks! We're especially excited to hear from folks who've DIY'd this kind of strategy before, would love your feedback.

Good luck with the launch!

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.

Thank you!

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.

I love it! Is it possible for you to add other markets, like Forex or hedging foreign stocks? Putting stuff that you would usually have to write yourself is very welcome, but I think there's a lot more that could be done here.

Awesome, thank you! We love diversification and to do that well, it's great to include a range of different asset classes / markets. For the next couple months though, while we refine our UX, we'll be sticking to stocks and ETFs. That being said, we have an ambitious long term road map.

I’ve asked on HN before why this exact thing didn’t exist. Now it does. Cool to see.

Very glad to hear that. We literally built this because we wanted it to exist!

I've actually been working on a small side project related to open source finance, so this is super cool to see and I'm very excited to use it! This seems like a great tool for use in trading communities etc.

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 :)

Thanks! Couldn't agree more. On the strategies front, we have some exciting ideas in the works. Github is one of our favorite products, tons to draw on for more advanced strategy development. Glad you appreciate the analogy.

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.

RIA's offer this kind of custom constructed direct indexing as a value add, so there's clearly a market amongst the broader non-active-trader types.

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.

Absolutely. Direct indexing has some unique benefits. Of course it's a bit more complex to track everything, but that's where we come in.

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.

Yep, personally I want things like small-value or fundamental-weighted funds that exclude fossil fuel companies, and that doesn't seem to exist.

I'd like the ability to see a stock or indexes historical "total return". That should include dividends. It should include currency fluctuations of whatever currency it's traded. It should take into account taxes on dividends Vs capital gains. It should take into account stock splits, etc.

Today, answering the question "If I had bought FTSE100 50 years ago, would I be better off today compared to buying Gold", is too hard

wow I was prototyping this myself and I'm glad someone else built it instead so I don't have to!

Does this hook up to Alpaca or something to let me buy and ease in and out in increments

I love this idea and really dug Motif Investing back in the day (although charging for trades made it hard when weighing that vs. Robinhood)

Thanks! Yeah we were recently pointed to Motif by some of our early users. Have loved seeing their enthusiasm for it, hoping we can provide a great experience as well.

It was really sad to see Motif shut down. That service was awesome. It's made me wary of trying new services for this, since their shutdown led to a bunch of shuttling around of portfolios from different, much worse services (Folio, finally Interactive Brokers).

Awesome, I signed up to be a user and can't wait to check it out!

Your privacy policy is either borrowed from a previous iteration of the company (supply chain logistics?) or from a sample somewhere. You should fix that.

I work for a not-quite-YC* company adjacent to yours; I see some plausible symbiosis. I have an email address in my profile here -- reach out?

* The photo at www.paulgraham.com/yctable.html shows two founders of my company talking to YC Summer 2005.

Looking forward to trying this. I noticed that the graphs on the portfolio page only go back to the date of creation. Are you planning to add support for viewing historical data? EDIT: it seems to go back to some arbitrary data a few months ago. Can't quite tell how that date is chosen.

Also FYI that I didn't receive a confirmation email after signing up for the waitlist.

Currently the charts go back to either: the most recent IPO, or 1 year from today.

We're working on supporting multiple time scales. Had to first do some refactoring on the backend to make this quick but it's in place now.

We've had a few hiccups with the confirmation notifications. The list seems correct though, and we'll reach out directly with invites. Thanks for the heads up.

This is great, and would love a beta invite. I run https://101.finance and share my entire portfolio for free. Have 300+ people using it and need a better way for it to scale. Currently share it through M1 but everyone has to manually update it so I can really update it only 1-2 times a year.

This product seems very similar to Motif.com, which shutdown about a year ago. How do you plan to avoid sharing their fate?

Yes, we actually weren't aware of motif until we onboarded a few users were who die hard Motif users. I think the value prop is quite similar but there are some important differences. For example, my understanding is the fees on Motif were somewhat high. Zero-commission was likely a disruptive force for them. Also, the number of sophisticated retail investors was much smaller when they started. The number of intermediate to advanced retail market is growing rapidly now that the onramps are much better.

Having recently put together a mostly ETF portfolio for someone I realized that unintentionally you could end building a large exposure to one stock, in my case... No surprise... it was TSLA. I found a tool on morning star which allowed me to do this analysis but would be good to have this in your app.

Definitely! We are really interested in portfolio analytics. This would surface naturally with our app.

I hate to be a negative person, but isn’t this what Steve Jobs called a feature, not a product? I work on trading systems before, custom built indices are very common. What’s stopping IB, Fidelity etc to simply put this in their system? I don’t know how you do rebalancing, corporate actions, etc?

I've asked around for this feature, since I started trading because its the type of investing I'm interested in. There do not currently exist autobalancing features on trading platforms (at least on TD or for small fish).

You'd have to build something custom. I'd definitely use their product!

I definitely see it as a valuable feature and I hope they successful disrupt the current market as capital market is too high and mighty.

Paul Graham wrote about this: http://www.paulgraham.com/startuplessons.html

Here’s where I think you’d get real buy in. Build an integration with something like Robinhood that automatically uses the selected portfolio and allow the user to configure a max amount so they can get a feel for it without completely revamping their entire portfolio.

Trading212 (uk based) has already this. They call this investing pies. It is already a hit in europe

Thanks for mentioning them! Yes some folks have pointed us to Trading212.

This looks super cool. Discussion amongst some friends of mine - how are you handling trust? I trust Vanguard not to pull a fast one after I've invested my money in one of their indexes, how do I trust JoeShmo when I invest in JoeShmo/dreamindex ?

Being able to the see the components is a great start, but one of the things we've been unable to easily do in our own trackers is dynamically remove particular stocks to see how much someone's portfolio growth is relying on e.g. TSLA. Any plans for that?

We're really interested in making the index editing dynamic. E.g. as you modify the weights, all metrics update in real time.

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

Amazing concept. I will definitely look into opening an account, and wish you great success.

Interesting. Reminded me of a piece in the FT I read recently around Direct Indexing. https://on.ft.com/3rDhUd5

Would love to try it. Have signed up on waitlist.

Just opened this up in a tab. Looking forward to reading it later. Thanks!

Wow, this is really cool. Will definitely give this a spin. Good luck to you guys!

Thanks! Looking forward to getting you on the product.

Hi,

all fine and dandy, yet there is no european version of your website (I guess?) nor any way for a european person to invest using your site, right?

If anyone knows about european alternatives to enombic, passiv or m1finance - please let me know.

Only thing I am aware of that is remotely comparable is Wikifolio (https://www.wikifolio.com/), then again, i am not very knowledgeable in that area, so if anyone has interesting european-based investing startup-links, I am all for it, please post and/or DM me. Thanks.

Rebranding stock picking as "index construction" is really quite disingenuous.

I guess you're encouraging somewhat diversified stock picking, but honestly I'm dubious this is a 'good' idea for expected outcomes.

Thanks for your feedback!

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.

I think OP's concern (which I don't necessarily share, but which I think is valid) is that indexes are generally considered to be relatively safe investments but if you're personally choosing the securities in the "index" you're essentially just choosing individual stocks, which is generally considered to be a bad idea for most people.

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.

Who cares? We put warning labels on cigarettes, we even tax them to offset the social cost of the badness of them. But we still have the freedom to consume them if we so choose.

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.

I find that even more disingenous than OP. That first link shows the Top 15 picks of the $VTI, but IIRC the $VTI is an index of 3,000 companies across the whole market. Picking 15 heavy-weight stocks is not even the same realm as an index fund.

She weights APPLE at 18.7% while VTI weights VTI weights the top 10 holdings for a total of 23% of the portfolio.

If you read Matt Levine's money stuff: a new favorite thing amongst financial products (currently only available to hedge funds, but on its way to becoming retail) is the following:

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.

A big fan of Matt Levine's thoughts on indexing and how vast amounts of passive investing are impacting the markets.

To be clear, that is active investment 101. You start by taking a portfolio matching your benchmark, then you apply an "overlay" which expresses your view.

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.

The S&P is stock-picking by that logic.

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?

No, it isn't. Not clear if you don't understand or you are being glib.

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

I’m being overly glib, but this just highlights the multiple definitions of active vs passive investing.

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.

What's the difference? answer: nothing. Passive investing doesn't exist. Everything is active

Some ETFs also allow easy investment in stocks of foreign countries without requiring additional brokerages on behalf of the end user. I presume this does not offer that functionality?

I signed up for the waitlist as this looks like a promising platform. Just curious, does this connect directly to a brokerage site (my own or another 3rd party) to make the trades?

https://www.smallcase.com/ does something similar for Indian markets.

I tried signing up but have been hitting an unauthorized error and am being bounced out. Is this currently only a landing page or is it something we can try?

Once we invite you from the waitlist you'll be able to sign in. We'll prioritize anyone who signs up today, and invite them in shortly.

Love this! Do updates to the ETF push out to anyone invested, or do individuals have to rebalance if weighting changes happen to the original?

Thank you!

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

Smallcase in India has been doing something similar. You can create your own "smallcase" or use any of the pre defined ones.

Looking at the dev tools, auth.enombic.com/authorize is being pinged about once a second. Seems like an Oauth request gone awry?

good catch, will fix shortly :)

awesome - always wanted to try to create a vegan/clean meat ETF that isn't mostly tech - will check this out

Another company in the field: https://passiv.com

Do you support the creation of something similar to an inverse ETF, so a basket of stocks can be shorted?

great timing, doji just launched today too https://twitter.com/ianmendiola/status/1364974427419598851

trydoji.com

Thanks for the link, we'll definitely check them out.

Cool idea, it it works. important thing is re-balancing should not be a taxable event.

This is a really really powerful concept – are you hiring?

Thanks! We are. :) Looking in particular for a strong backend engineer. Tech stack is python, aiohttp, redis, postgres (& timescaledb), k8s, terraform, aws (react, nextjs, swr on the frontend).

Know anyone?

I'm interested in learning more

Would love to chat. Email us at hello [at] enombic [dot] com and we'll find a time

I assume this hooks into back-end brokerages? Which ones?

Does it/are there plans to support options?

Thanks for asking. Not in the next few months. We really want to nail the UI/UX around stocks and ETFs before we expand our footprint.

is it possible for other investors to participate or subscribe to your ETF, the way Angellist does for angel investments?

Thanks for checking us out! Any user can invest in any other user's index, as long as it's public.

>>We would love your feedback on what we've built so far.

Id love to provide feedback, but it seems i'm waitlisted when I sign up. Is there a HN-skip-the-queue?

Awesome! Definitely, didn't call this out explicitly in our post but anyone who joins the waitlist today will be expedited.

Cool just signed up and same issue, unauthorized when I try log in

Hey, thanks for checking us out! If you submit to join the waitlist, we'll prioritize you in the queue. Attempting to sign up or login in at this time will just route you back to the landing page. It's not a very clear UX at the moment, thanks for reporting it.

nice, been waiting for this. Some questions - What broker do you use? How do you do rebalancing?

What's the source of the name?

combine -> enombic

love the idea, but will this be open to people outside the US?

Thank you! Not at the moment but we hope eventually.

I have had so much fun messing around with enombic the last couple of months. The founders are super responsive, friendly and obviously smart!

I look forward to watching enombic grow! Good luck team!

Thanks thegreatpeter!

Thanks Peter! It's been terrific having you on and getting your feedback.

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