10-04 Practice, Practice, Practice

10-04 Practice, Practice, Practice

Every skill you will ever acquire requires a lot of practice, and investing is no different.

You should have started building your practice portfolio by now as part of this course – if you have not, you have been SERIOUSLY missing out. Even after this course, there are free practice portfolios you can keep using forever (like wallstreetsurvivor.com or howthemarketworks.com), with many companies offering paper trading “contests” every month so you can try out new strategies on a regular basis.

Besides your actual brokerage account of the stocks you actually buy, every investor should maintain a “watch list” of other stocks they are interested in, but not ready to buy right away. This will both speed up the research process the next time you are ready to make a “buy” decision, but also keep you sharp about what else is happening in the investing world.

Because you are a new investor, you need to practice the most NOW. Our recommended “recipe for success” is after you finish this course, understand the fundamentals of investing, and have worked with your first practice portfolio for at least 1 month, start out fresh with two new practice portfolios:

  1. Your “Active Trading” portfolio, where you can practice swing trading techniques and actively make trades at least once a week in response to market movements.
  2. Your “Buy and Hold” portfolio, where you carefully research 10 companies from at least 5 different industries. Buy these stocks and monitor the portfolio but place no additional trades.

After two or three months, compare your two portfolios. Which one did the best? Which one was easier to manage, and left you feeling more confident? Use this experience to help determine how “active” you want to be with your own investments; which will guide the type of investing strategy you adopt.

When you are ready to open your own brokerage account and start trading for real, the practicing does not stop. You should keep a practice portfolio for at least a year. Make sure to trade stocks that are NOT part of your real brokerage account so you can gain more experience and can compare the performance of each. You’ll get a feel for how the markets react to news and other events, and have more trading ideas for your real portfolio when you are ready. Also, that means you’re conducting research for both portfolios, making you even better at spotting good opportunities.

In this course, you have learned all the fundamentals needed to be a successful investor, but this is only the start of the road. Until you have sufficient practice, you are still a junior on the markets.