One thing that I wish I did when I started investing was to create a mock portfolio before I took the plunge with real money.
As usual, my impatient self wanted to just go in and take the plunge before testing out the waters. Because of this cavalier attitude, I started out investing in a lot of investments that were not the best. These included penny stocks (one of which I still have to sell, I am down over $800 from this), high risk stocks such as silver and gold, and other “hot stock tips” that really yielded me no where except… well down.
What is a mock portfolio?
What is a mock portfolio, you ask? Well, much to your chagrin, it’s not making fun of someone’s portfolio (cue cheesy drum interlude). A mock portfolio is akin to playing in the sandbox before heading to the jungle gym. There’s no risk at all because you’re using fake money and fake investments (with real stocks of course). It gives you a prequel to what you might be facing when you head out into the real stock market world.
According to eHow (which of course, tells you how to do anything from dating in your 30′s to show him you’re interested, hence a reliable source for investment advice too! lol) mock portfolio is a great learning tool that helps you create an investment portfolio to see how you fair with an imaginary amount of money invested. It is no risk (except for maybe a risk of bruising your ego if your mock portfolio doesn’t do well).
Pros of using a Mock Portfolio
One of the pros of using a mock portfolio is that it carries no risk. It also gives you a taste of what it might be like with a real portfolio.
Cons of Using a Mock Portfolio
With all the positive aspects of starting off with a mock portfolio, there are a few downsides to starting off with a mock portfolio that I can identify.
Because it’s fun money (or play money or monopoly money or however you want to call it) it carries little risk. Therefore, your actions in your portfolio might be different than if it were your real money. Let’s face it, with real money, you wouldn’t be as confident with your investment moves.
The other downside of using a mock portfolio depends on timing. Depending on when you start with the mock portfolio and how long you do it for, you might be “investing” during a time of high growth, which will make you regret you started with a mock portfolio instead of a real portfolio. Conversely, you might invest in your mock portfolio when the market is going sideways or not very well, and it might turn you off investing all together.
How Do I start a Mock Portfolio?
How does one start a mock portfolio? Well, all you need is Internet connection (I assume you have Internet connection since you are reading this post) and a mock investment account.
Most investment brokers give you the opportunity to open up a mock portfolio and some places (I remember Questrade did when I first started) have classes to teach you how to invest (e.g. Online Learning Academy who still sends me invites now and again, but I just toss them in the garbage).
In addition, Google Finance and Yahoo are also great sources. In fact, Google Finance is 100% free and you won’t get incessant emails or mail from your broker asking you to start investing. Therefore it’s even less risk.
Yahoo has a great article on how to start a mock portfolio and how to get started with investing in general.
Had Enough of the Jungle Gym?
That being said, even after you try out the mock portfolio and you find that the risk is too high (which of course, it can be), you can always opt for index investing and for exchange traded funds investing instead. That way, there’s less ego, there’s less “gambling” or speculating, and there’s less stress.
Here are some great posts on exchange traded funds and index investing for you to get started if you don’t want to invest in the stock market in individual stocks.
Readers, did you start off with a mock portfolio before you began investing in the stock market?