Adding to the Mock Portfolio


By Carlos Portocarrero

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engadget.com

Even though I claim to be a responsible investor interested in as much return as possible without too much risk (hence why I like index funds so much), I’m still human. I watch stock prices shoot up 30% in a matter of days and I imagine how much money I would have if I pulled off a couple of those trades. The allure of the market is tough to resist — it’s like the rush some people get from gambling. Anyway, I will sometimes indulge the market and buy some individual stocks (right now I own two), but for the most part I stick to index funds. But how do I get rid of that itch?

Paper trading, that’s how. You can’t make any money and you can’t lose any either, but you can learn a whole heck of a lot while you’re doing it. Looking back on “moves” you’ve made can teach you a thing or two about investing, yourself and the psychology of the market.

Today I am adding a stock to my virtual portfolio: Research in Motion (RIMM).

Even though I wanted to “get in” at $116, I’ll just go ahead and buy it at what it’s running today, which is $131. Simply adding stocks left and right is no fun, however. The fun part is in analyzing why you bought certain stocks and whether or not you were right. Why am I buying RIMM? One word: Thunder. That’s one of the new phones that RIMM is going to release this year. Why such a big deal? It’s a Blackberry phone with an iPhone screen. There has been an ongoing debate ever since the iPhone came out about which is better: an iPhone or a Blackberry. RIMM still has way more market share than Apple does and business users still rely on their Blackberries like nothing else. Pay attention on the train or the bus next time you go to work: do you see more Blackberries or iPhones? Now imagine there was a Blackberry with the sexy touch-screen that is all the rage right now. Things are about to get interesting.

If this all sounds familiar, I’m basically going off of what the iPhone 3G did when it came out. Being the “it” device drove a million people to buy it in just three days. I’m expecting the buzz over the Thunder to be just as big. And in case you’re a curious cat, Verizon (VZ) has the exclusive with the Thunder, so if you like what’s happened to AT&T (T) with all the iPhone mania, then maybe you’d like to take a look at Verizon. As for me, I’m just going to add RIMM to my mock portfolio. Does that mean the stock will go up? Not necessarily, but since I’m a long-term investor, I’m willing to bet it will eventually impact the stock in a positive way.

By the way, how do I “know” all this stuff? Well, I love gadgets for one. So while I guess you could call it “research,” to me it’s exciting reading about all the latest bells and whistles that these phones are going to have in them. I wish I could buy them, but my frugality is too strong to give in (so far). Plus my wallet is too thin. And in case you’re curious, I own a Motorola PEBL that doesn’t do much other than make phone calls and look small.

Paper trading will never replace the feeling you get when you’re actually putting real money into a stock. It’s a rush but it can also be very stressful. Luckily for me, I don’t have hundreds of thousands of dollars tied up in any particular stock (not yet anyway), so the stress level for me is minimal. Once you’ve paper traded for a while, you’ll be better equipped to make these kinds of decisions and eventually buy real shares in real companies.

DISCLAIMER: This is NOT a recommendation and you should NOT take it as such. This is me, a regular dude with no financial training, fake-investing in the stock market. Grain of salt please.

[Image from Engadget.com]

PS. This post has been included in the Money Hacks Carnival over at Our Four Pence Worth. Make sure to check out all the other great entries.


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