Want to invest like Buffett and Soros? Use the iBillionaire index

The easiest way "to invest like a billionaire" is start betting with a billion dollars. If you don't have that, there is still a chance to invest like the super rich - join the new exchange traded fund with an attractive methodology.

The question is whether this is a trick or it really works.

The new Direxion iBillionaire Index ETF was launched on Friday. It keeps track of 30 large-cap securities favored by the likes of Warren Buffett, Carl Icahn, David Einhorn and George Soros based on the most recent 13F filings with the SEC.

If you can not be the best, just repeat the actions of those who can do it perfectly well. It sounds simple in theory, but it is not so easy in practice. One could, of course, choose someone of the successful rich guys and see how he behaves in the market. However, the iBillionaire index reflects the general trading activity trend of more than one trader. This idea is much better than following the three guys (one of which is a newspaper editor) who collect assets data and prepare Dow Jones Industrial Average. Actually this is what the iBillionaire president Raul Moreno does.

The Direxion iBillionaire Index ETF fund was created to reflect the "big" leaders' positions - like Warren Buffett and Carl Icahn. The index uses the billionaires list produced by Forbes and Bloomberg to identify about 20 US billionaire investors. Then 10 billionaires with best performance are picked up out of the 20 "gurus". These billionaires are tracked quite legally - by analyzing 13Fs, that investors with position in equities of more than $100 million must file (13F is filed by investors for the Securities and Exchange Commission). 13F list billionaires' equity holdings during 45 days after the end of the quarter. The 30 stocks, in which most of the "gurus" have invested, make up the fund index. This index is revised quarterly. For example, Apple was popular with the guru in the first quarter of 2014. Each of the 30 stocks in the index have equal weights. 

However, there is a similar Global X Guru Index ETF index. But it tracks not only large companies but also mod-cap and small-cap companies. In 2013 GURU fund return was +48%, which is 32% more than the market growth. Well, the idea of tracking great investors is not new, but it has got a much better implementation in the Direxion iBillionaire Index ETF. Look: a portfolio of 30 stocks of large liquidity companies with 10 best billionaire investors. And all this "happiness" is reviewed on a quarterly basis.

Of course, there are doubts about how realistic it is to make money based on the data of the new index. Investors may come away feeling like iBillionaire ETF is more marketing ploy than something to buy.

However, Raul Moreno can disagree. In an interview in MoneyLife with Chuck Jaffe, Moreno says that investors are trying to follow the investment gurus, and that "this makes it much easier to do". Moreover no one forces the investor to rely on any particular expert.

The weight of each of the 30 holdings is 3.33% of the fund portfolio. This means high bets both on Micron Technology (which is only 0.17% of the S&P 500), but also on big names like Apple (3.14% of S&P). Of course, with Apple, eBay, Mastercard, Dow Chemical, Halliburton and Google, it's not a secrete "sauce" to billionaires' taste. 

Actually, iBillionaire is simply "an index of 30 stocks that rich guys like". Who knows whose selection process is better, maybe that of Dow Jones Industrial Average, but it will take years to figure it out. Another advantage of the new index - the billionaires included in the fund have been outperforming S&P for many years, and that's why people follow them, and that's why the index was created.

Who knows, maybe after some time, the new strategy can prove that it is better than the Dow Jones and S&P, but now it is perceived more as an idea for the people who do not want to research or homework themselves, but who want to invest in the same way as the guy they know with a lot of money.

So, if you like the idea of ​​the fund and you are ready to take the risk and go deep, try it. Just remember that attractive ideas can be made for a good marketing hype, but they do not always turn into good funds.