Start Investing Today With A Fake-folio! I Show You How

Focusing on maximizing your income and savings are two areas that are critical to focus on before investing. The problem is that there are realistic limits to how much we can earn and how much we can reduce expenses. The key to becoming financially independent is to invest the difference between income and expenses into fruitful opportunities.

Whatever limiting beliefs you have about investing in the market, I urge you to put your prejudices aside and make a fake-folio with me! I will be going over the literal steps you need to take to make your first portfolio (real or fake).

Investing with ‘paper money’, as it is more commonly referred to, is a common practice amongst professional traders. You can learn a lot about investing with play money in your fake-folio!

Keep in mind, in this article, I will be talking about stocks, but you can always look at other ‘asset classes’ (bonds, REITs, Mutual Funds, ETFs, etc..) to invest in if you are not interested in stocks.

Step 1: Download The Yahoo Finance App – Set Up An Account

I hope the first step is straightforward enough. For people currently without a yahoo account, I swear you will not implode by having an additional email address in your life.

Once you setup your username and password, you should be able to select an option called ‘My Portfolio’ and see a screen like the below.

Setting up your account and downloading the app is literally the hardest part of this exercise.

Screenshot 2017-05-01 at 11.45.34 AM

Step 2: Observe Trends In The World

As investors, we should take a second to think about what we want to invest in. We should think about what trends in the world are increasing and which companies are the leaders of this trend. There are plenty of new trends that are increasing quickly in the world. Investing in a trend properly can possibly result in serious growth.

Take the trend of e-commerce for instance, which is still rapidly growing. Amazon, Alibaba, Paypal, Shopify, and Priceline are all great examples of stocks that can be invested in if you are looking for promising e-commerce companies.

There are many trends to invest in, below are just a few I can think of:

  • Stay at home trend (Netflix, amazon, ups)
  • Beauty/makeup trend (ELF, ULTA, Este Lauder)
  • Gaming Trend (Activision Blizzard, EA Games, Take-Two Interactive)
  • Travel Trend (Boeing, Southwest Airline, Alaskan Airlines, Jetblue)
  • Fast Foods (McDonald’s, Wendy’s, Chipotle)
  • Automated Car Trend (Google, Tesla, Intel, NVDA)
  • Marijuana Green Trend (Scott’s Miracle Grow, Cara Pharmaceuticals)

Along with each trend I listed above, I also listed companies that are publicly traded that you can invest in today!

Step 3: Can You Invest In That Trend Or Company Riding That Trend?

The key to becoming a good investor is to believe in yourself and your own gut instinct. Why is it that so many of us own iPhones that cost over $600, but don’t own a single share of Apple (AAPL)?

If you love a product and truly believe in that product, then I urge you to consider investing in it. Keep in mind, it is very easy to have been a fan of Blackberry and lost over 90% of your overall investment. Sorry Blackberry investors! 🙁

Whatever the case may be, the entire point of this fake-folio is to begin making your investing mistakes with fake money instead of learning lessons the hard way… with real money.

The sad reality is that not all companies are publicly traded. This fact is a shame, as there are plenty of companies that would be great investment opportunities if given the option.

Some companies that I would definitely invest in if I could, would be (1) Uber, (2) Steam, (3) Airbnb, (4) DoggyVacay, and (5) RiotGames. Sadly, these amazing companies are not publicly available on the market.

Step 4: Add This Company/Stock To Your Portfolio

So, let’s start adding stocks to our portfolio based off of trends that we see or think are going to do well. For example, I think cigarettes are going to be gone in the next 50 years and cigarettes are going to slowly be removed from pharmacies.

CVS stores all around the U.S. have stopped selling cigarettes, and I think that CVS will have a competitive advantage because of that trend (this is just an example).

So, I invest in CVS. The first thing I do is search CVS in my ‘Yahoo Finance App’ after I click ‘Add Symbol’.

Screenshot 2017-05-01 at 11.46.22 AM.png

So, once I see ‘CVS Health Corporation’ show up in the selection options, I select it. Once I select it, it will automatically appear in my fake-folio.

Screenshot 2017-05-01 at 11.47.12 AM

Once it is added to the fake-folio, we need to select the ‘Add’ button that is blue under the ‘Shares’ column.

Screenshot 2017-05-01 at 11.48.11 AM

Once you have selected the ‘Add’ option, you will enter the price paid, which will be the current price of the stock.  In this case, CVS has a closing price of 82.44 the previous day, and I am buying 15 shares of CVS. Then click save, and you will see a confirmation screen that you can simply back out of.

Screenshot 2017-05-01 at 11.49.05 AM.png

Be sure to enter the current price of your stock at the moment you enter the value, as you do not want to have unrealistic returns due to typos.

I am personally recommending to start with a budget of $10,000 in your fake-folio, as I believe this is an amount everyone can realistically invest some day. You can invest all your money into one stock, but I strongly advise spreading your money across 5-10 stocks and eventually reaching 15-30 stocks in the long-run.

Once you have added enough stocks to your portfolio, your portfolio should look something like mine (below).

Screenshot 2017-05-01 at 11.49.52 AM

For my fake-folio, I invested in Amazon, Alibaba, Coke, Twitter, Paypal, and CVS.

Step 5: Invest Regularly/Realistically

Don’t stop now, we definitely don’t want to forget about the fake-folio now that it is set up. If you had invested $10,000 in the actual market, you would most likely be watching that money like a hawk. I know that I did (do).

The next step of having a fake-folio is checking the results every day(once a day at the end of the day) and see how good you are at investing. Perhaps you’re a terrible investor, or maybe you’re the next Warren Buffett, who knows?

The point is that this exercise is meant to simulate the actual feeling of investing real money in the market.

Over time, I suggest adding more fake money to your fake-folio as you would if you were investing in real life. If you are able to invest $1,000 a month in the market, then start investing a fake $1,000 every month in your fake-folio to give it a realistic feel.

So, make your fake-folio today! Heck, make 5 fake-folios! Think of clever strategies and ideas that the big bad market isn’t taking advantage of and see if you can beat the market.

Step 6: Open A Real Account

Once you have practiced with your fake-folio, then the next step is to open a real trading account, which is linked to a real bank account, using a real online broker. There are many brokers you can use; e-Trade, Ameritrade, Fidelity, or any other option from the several choices available.

My personal recommendation is to use robinhood.com, where you can buy and sell stocks for FREE!!! Yes, for free! Commission costs definitely rack up over time, and I strongly suggest a commission-free platform.

If you want to dip your real life toes into the treacherous waters of ‘The Market’, then I suggest to start slow and do your homework.

You don’t need to be a genius to invest in stocks successfully. You just need some knowledge, practice, and patience in order to be a successful investor.

-Jack

 

PS: There’s one more thing you need; to start right now!

 

 

*DISCLAIMER: Don’t invest in any singular stock based off the above advice. This blog is meant to be supplementary to your own research and provide strategies to investing*

 

7 comments

  1. As someone who is not interested in stocks, I definitely recommend investing in funds like the ‘SPY’ or ‘QQQ’ as these funds follow the market indicators closely instead of mutual funds.

    Mutual funds like the vanguard 500 will cost a slight commission, I know my vanguard fund charges me a third of a percent. Also it is important to keep an eye on these mutual funds over time as the strategy of the fund manager is not very clear.

    Read my blog post on ‘What Is A Retirement Account? Asset Classes Explained!” and I think this will answer your question better.

    Thanks for the comment!

    -Jack

  2. Very good post. We use a financial advisor because I feel so clueless and hubs cannot watch it actively enough to trade. This would be fun to learn how to better pick and observe hat influences action. What do you think about funds, like Vanguard 500, “for dummies” like me? No trading advice implied :-).

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