In: Root » Legal and finance » Stocks and mutual funds » Practicing the Business of Real Purchases
Although you’re moving closer to your first real investment, you may not realize the work that awaits before your money actually leaves your hands. Here’s what you can do to prepare for that day. Playing the Paper GameThe Paper Game is an exercise that invites you to buy stocks virtually, that is, in your head or on a spreadsheet. 1. Start by saving $100 a month. Put it away in some safe place like a bank savings account. 2. When you see or hear of a stock that looks promising, check it out using the eight criteria I mention earlier in this article and then pretend to buy some shares. . Call a discount broker and find out the price of the stock for the day you make your practice purchase. Also, be sure to ask the commission you would pay if the transaction were real. 4. Pretend to buy several other stocks and really put your mind into what you are doing. Pretend you’re actually using your own hard-earned dollars. Note why you’re buying each stock and what you expect to gain. 5. Follow your purchases in the daily paper and record their prices once or twice a month. Continue saving $100 each month. 6. As the big day comes for you to make your actual initial stock purchase, review your virtual purchases. How did you do? If the stock rose, was it what you expected? If it fell, can you figure out why? 7. At the end of the year of saving, give yourself a grade. If your portfolio of virtual purchases went up 15%, you’re probably ready to buy. If you lost money, rethink your strategy, but don’t give up on the stock market. 8. If you have the money to invest, feel you’re done playing the Paper Game, and have done research to your satisfaction, narrow your selection down to one to three stocks and buy them for real. If the Paper Game is not your thing, still try to identify one to five stocks that look promising. If you’re convinced that you’ve identified one or more quality stocks and feel ready to invest, go for it. But, please, do not shortcut the necessary research that you should do before you buy anything. If you haven’t been following stocks until quite recently, make sure that the stock or stocks you buy are more than current “hot” stocks, ones that have experienced a sharp rise in value in the last year. Make sure your first purchase is of stocks that have had three to five solid years of performance behind them. |
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