Frequently, folks want to invest or learn how to invest but have no idea how to get started. Some brave souls will venture out and plunk their cold, hard cash into stocks that were recommended to them by a friend and hope for the best. Others will sit on the sidelines waiting and wishing they knew how to get in the game. Still others will turn their portfolios over to a professional money manager who makes the decisions for them. What if you want to ‘play quarterback’ and call the plays for your own portfolio? How do you learn how to do that? Is there a way to work your way up from the amateur ranks?
Paper Trading vs. ‘Real’ Trading
Here’s an idea. Why not ‘paper trade’ until you figure things out? You do all of the same research and strategizing that one might do with a ‘real’ portfolio, but you don’t use ‘real’ money. For example, at http://finance.yahoo.com, you can track a portfolio in real time to see what gains and losses you would incur if you were actually buying and selling the securities in your ‘tracking portfolio’. Now, for some folks, that’s just not exciting enough. What’s the point of making great trades with fake money if you’re only going to get fake profits?
Never Fear, ‘Answer Girl’ is Here!
Why not check out an investment challenge? You get the same educational benefit of paper trading, but the excitement comes in with the opportunity to win prizes. Now, there’s one caveat here. Often times, when we trade in a simulated ‘gaming environment’ we make decisions a little differently than we would if there were real money involved. That is, in a game, there really is no downside risk. The worst thing that could happen is that you lose. That may be devastating to some people, but in finance, it’s all about the cash. With no cash losses at stake, there really is no risk. However, if you make a bone-headed decision in your real portfolio, your life savings could be gone in a blink of an eye. Still, trading games can be a fun way to learn about the markets, test your skills and become more financially savvy with very little risk except the potential for market addiction!
Let’s Get It!
This year I think I will try CNBC’s Million Dollar Portfolio Challenge. Here are the highlights:
- Real-Time Equity Trading on the NYSE, NASDAQ, LSE and ASX
- Real-Time Currency Trading
- 1st Prize: $1,000,000
- 2nd Prize: 2012 Maserati GranTourismo Convertible Sport
- 10 Amazing Weekly Prizes
- Free $50 currency trading account, courtesy of FXCM
- Free access to CNBC Pro for new subscribers until 10/15/2011
What’s even cooler is that you get to trade up to five different $1,000,000 portfolios simultaneously and you can even use 10% of each portfolio for currency trading. I am SO in! Even as a person with a little bit of knowledge in this area, I don’t expect to win SQUAT! Still, it’s a fun way to work on my investment strategies before putting my real cash at risk.
I’m such an advocate of these types of learning opportunities that I think I’ll challenge my students to join the Challenge. Heck! I’ll even give my top performing students bonus points. Let’s see if they can beat me. Now, what about you? Are you up for the Challenge? Send me an email or post a comment with your username, if you decide to play so that we can compare progress. I am ‘syrauterkus’. The Challenge starts September 19th, so check it out! What have you got to lose?