Paper Investing

I l @ ve RuBoard

Having confronted your fears and determined how much you have available to invest, you are almost ready to begin your career as an investor. However, since money is involved, it's not a bad idea to first try a dry run and apply the information you learn here to a fictitious portfolio of stocks.

This process, better known as paper investing, is a particularly good method for getting started in investing. Through paper investing, you as a potential investor can in absolute safety apply your new knowledge to real-life scenarios, later discovering whether your decisions were correct.

Use the knowledge you gain in this book to decide upon your standards for selecting an investment strategy, choosing stocks, and achieving a portfolio mix. Write these particulars down; then pick investments or stocks that meet all, or at least most of, your stated criteria. Monitor these investments over a period of time (a couple of weeks or months) to see if your initial decision remains a good one.

TIP

Amassing a fictitious portfolio, or paper investing, based on information you have learned is a good idea for new investors. Analyze your portfolio's performance to determine how good your initial investment decision was.

You can begin your paper investing now, and increase your selections as you continue to learn new and relevant information throughout the book. Paper investing will make you more comfortable with the real investment process and will provide real-life examples to illustrate many of the theories presented here. Both of these actions will increase your understanding and comfort level and make you a better investor.

The 30-Second Recap

Investments are only one part of responsible financial management.
Before investing, you should have savings of three to six months of living expenses.
Lower or get rid of debt. The interest you pay on it may negate any profits you make from your investments.
Determine your income and expenses so that you can appropriately allocate your money.
Before investing, try a dry run by charting imaginary investments' performances .

I l @ ve RuBoard