Playing the stock market, risk-free

The benefits and drawbacks of online investment simulators.

Illustration by: Cosette Puckett

Have you ever thought about buying stock in a certain company, but then remembered that you only have enough money left in your account for one pint tonight, or maybe two? Or perhaps you heard news about a company that was on the up and thought – if I knew anything about trading, I’d in invest in that. Or maybe you have always just wanted to know more about picking stocks?

Playing the stock market sounds exciting. Whether you are a risk lover, follow business and financial news closely, or just love The Wolf of Wall Street, the idea of picking securities, making trades, and tracking your results can be immensely appealing.

Yet it is also a daunting and complex prospect. Committing even a fraction of your potentially hard-earned student funds implies putting a degree of faith in your skills to follow and read a market, a skillset which takes time to develop.

Enter a stock market simulator.

Online stock market games are simple programs that mimic the real-life workings of the equities markets. There are a host of stock market simulators to choose from, each boasting a variety of features and benefits. Some are simple to use, and offer only basic investment choices and trading strategies. Others are more complex, boasting advanced securities such as options and currency trading.

Most stock simulators provide users with $100,000 of in-game capital to begin trading. From there, traders can buy and sell stocks, mutual funds and exchange traded-funds at their real valuation in US and Canadian markets. Some sites seek to mimic the real markets as much as possible, providing real-time hours that match the stock market, including pre-market and after-market trading, and even including a delay in making trades.

Speaking to a third year Geography and IR student who had tried out Investopedia’s Stock Simulator, he admitted that the most rewarding aspect of using the simulator was not the virtual profits that could be made, but rather the shock of losing thousands in one go. After following his gut and quickly buying up a large stock of risky shares in an attempt to “outsmart” the system, he enjoyed healthy gains for a while.

However, the market turned, and he soon found that his considerable virtual losses would have been enough to cause him to lose sleep, were this a real investment.

A simple lesson to be learned from these programs could be that our intuition is almost useless in the stock market when we know nothing about the shares that we are investing in.

Many different versions of these simulators are on offer, from the simple How the Market Works which advertises itself as “the web’s most popular free stock market game” to the more complex Wall Street Survivor. Such simulators provide a safe, structured environment to test would-be investors who can follow the patterns of the market and learn from more wizened investors and the ever-great wisdom gained from failure.

It’s undeniable that the thrill of winning is somewhat diminished when there is nothing to lose, and even more so when there is nothing to win. All the factors that play into the excitement and risk of trading, such as one’s risk tolerance, investment horizon, investment objectives and need for diversification, will surely never come in to a simulator. And, as well as you may do, there’s no beach home in Tahiti on the horizon.

All the same, investment simulators are a great way for would-be investors to dip their toes into the market. Maybe by losing the shirt off your back in a game, you’ll be all the warier and wiser when it comes to the real thing.


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