Ready to Invest…But Not Really?

By Jacquette Timmons

There is no question that investing in the stock market is one of the best ways to create wealth. But when the stock market goes down 600 points one day; rebounds 400 points the next day; and then retreats again by more than 500 points the very next day, it is no wonder beginner investors are squeamish as they try to figure out what do, when, and how. Heck, even the pros have a hard time stomaching the drastic swings – aka volatility – even though the market’s ups and downs are part of its nature.

However, there is a way to "practice" investing before you actually invest. It is called "virtual" investing, and there are many benefits to having a virtual stock portfolio. For starters, you get to see if how you think you’ll react is how you actually react when you gain or lose money. This is a wonderful way to help manage your expectations. Second, it can satisfy your curiosity about the stocks you have your eye on - on both an individual basis as well as in combination with your other portfolio holdings. Finally, managing a “practice” portfolio is a great way to get objective confirmation as to whether or not you behave like an investor…or a trader.

Here are two ways to use a practice portfolio to prepare for actual investing:

• Open a virtual account with companies like WeSeed or the Wall Street Journal’s Virtual Stock Exchange – both are free to join, use fake cash, and operate in a virtual trading environment with real-time stock exchange conditions.

- or -

• Create a virtual portfolio using Yahoo.com and an excel spreadsheet to track losses and gains. Ironically, "practice" investing is not only good for beginners; it is an excellent way for more experienced do-it-yourselfers to "test" the waters before committing to particular stock or portfolio of stocks. But there's one word of caution: Don’t do anything in your virtual portfolio that you wouldn't do if you were using real cash. If you do, you mitigate the benefits that come from getting ready for the real thing.

Oh, and as an added bonus, if you and your spouse/partner create separate "virtual" portfolios you can see who is really more skillful…how's that for some healthy competition?