The Fascination with Fantasy Stock Markets - Why We Play The Game Instead Of Investing

Stock market simulations have existed for about as long as the actual stock exchanges themselves have been around. however, it has only been recently, especially in the Internet age, that stock market simulators have come to the forefront.

With the dot.com explosion of the late 90's and the dot.com collapse of 2000-2002, with most of those companies gaining rapidly because of stock pricings and IPO's, stock simulators began to appear so people could test theories without risking money. Try new investment strategies and loss-leader plans without actually putting anything at risk.

When the collapse occurred - people went to the simulators and began investing more time to make them more accurate, to try and reflect what had happened. The simulators became living stock markets themselves, with a 20 minute delayed quote from the NYSE of course :) The companies running these simulators did not want people pulling live data off the game, then going to another company and investing, thus losing the commission.

Because at the bottom line, that is what all this comes down to - how can we entertain you long enough for you to feel confident so you will then invest your money through us so we may gain commission? Stock market simulators are all about confidence. Once you can play the sim properly, you can feel confident enough to put your money down and play the real market - hopefully with the same result a the sim, a gain rather than a loss.

Not just to learn how to invest wisely, but to enjoy what has been created and to play in someboy else's sandbox - and see what your castle can look like when you're done.

However ... if that is the case, why are there also Fantasy stock markets, where you buy and sell things that are in no way possibly real or even have a chance to be real? Because the very thing that makes a fantasy market unreal is that which pulls you in - the chance to imagine you can buy or sell whatever commodity they offer.

Whether the market is offering shares in the next big celebrity, current run Hollywood movies, future events that may never happen (Like Arnie becoming president), the Fall Primetime TV show schedule, current news events or even the next big search term - these markets offer such an unreal view that it fascinates people and draws them in to explore it further ... and maybe stay a while, play the game, and enjoy themselves.

The rise of fantasy stock markets and stock market simulators has not slowed - every week another simulator or fantasy market comes to life - and every week people sign on to play the imaginary financial or fantasy world that has been created.

Tim Morrison

www.morristreet.com

Stock Investing: Why Controlling Losses and Managing Risk Are So Important

Portfolio management is largely about managing risk. Warren Buffett said, ''The first rule is not to lose. The second rule is not to forget the first rule.''

''Managing risk'' means doing things that safeguard your money from the possibility that any investment decision may be wrong. Therefore, risk management includes any practice that:

• Lowers the inherent risk in investing in stocks—recognizing that all stock market transactions entail some risk;

• Increases the probability that your stock investments will profit (or, stated another way, lowers the risk that you will miss out on making money from good opportunities);

• Takes you out of harm’s way by exiting individual stocks or the entire market when conditions warrant.

Risk management is not a prediction that things are going to go bad, but it is a defense against the possibility that they might go bad. Contrary to popular opinion, avoiding outsize losses—not hitting the occasional ''home run''—is the most important factor in beating the market.

Every risk management maneuver, itself being an investment decision, carries its own risk. The risk in risk management is that it will make you so cautious that you will not make as much money as you would if you accepted more risk. For example:

• Easing into a stock position through multiple purchases—a common risk management technique—will cost you money if the stock goes straight up after your initial purchase. It is not money you lose, per se, but money you fail to make by not buying the stock all at once in the first place.

• Selling a stock because of a short-term price drop will stop your losses in the short term, but if the stock reverses itself and goes back up and beyond the price at which you sold it, the decision to sell will cost you the profit you would have made if you’d simply hung on to the stock.

• Diversifying will cost you money compared to what you would have made if only you’d known which single stock in the universe was going to do the best and just bought that.

So why practice risk management? To protect against devastating losses. In the long run, your returns are most likely to beat the market if you avoid outsize losses. The idea is to balance risk vs. reward opportunities in order to produce the greatest return in the end.

Risk management techniques range from the extremely simple—like easing your way slowly into the market—to highly complex activities utilizing sophisticated investment products and strategies that are beyond the ken of the average individual investor. In this regard, one often hears the term ''hedging.'' Hedging is a subset of risk management. The term usually means buying (or selling) something—like another security, an option, or your own stock short—which theoretically offsets the risk of what you already own. The Sensible Stock Investor manages risk using simpler techniques.

Why is controlling losses so important? Because it is so hard to make up for them. Let’s look at a few examples. If you lose just 5% in a stock, it only takes about a 5% gain to make up for it. But as the percentage of loss grows, the percentage you must then gain—just to get back to even—grows geometrically. A 25% loss takes a 33% gain to get back to even. A 50% loss takes a 100% gain. Some of the dot-com high-flyers of the late 1990’s lost 90% of their market value. What do you think it will take to get back to even? A 900% gain! Realistically, that’s not going to happen.

So the Sensible Stock Investor avoids outsize losses in the first place. The new book, ''Sensible Stock Investing,'' describes in detail the relatively simple techniques that the individual investor can use to sidestep large losses—such as not using margin, not selling short, and controlling losses with sensible sell-stops. Remember Buffett’s Rule #2: Don’t forget Rule #1. And what was Rule #1? Don’t lose.

If you would like to learn about a comprehensive stock investment approach that that uses the same strategies reflected in this article, please consider purchasing the new book, ''Sensible Stock Investing: How to Pick, Value, and Manage Stocks.'' We encourage you to reproduce this article or any portion of it, or to email it to a friend. If you reproduce the article, you must include the title, author, and the following Web site address: http://www.SensibleStocks.com

Investment Strategy: Contrarian Investing 101

Have you ever wondered why some people are able to invest in any financial instrument or property at a low price and why you have always missed the boat? This article explains the importance of understanding why contrarian investing works and how having such a mindset can help you make more money as part of a larger investment strategy.

1. Value Investing mindset

Before one can profess to be a contrarian investor, you must have an understanding of the underlying value of the thing you are buying and decide that it is undervalued and historically and the market will rebound within a good period. A good book to start reading on value investing in the stock market is “The Intelligent Investor”, by Benjamin Graham who was Warren Buffets’ Professor in Columbia University and helped shape his investment strategy. So because you know the usual market value of something, you can purchase it on the cheap when prices drop , not unlike shopping for discounts at a supermarket.

2. Look out for downturns

Another key indicator is to understand your market well and then pay a careful attention to downturns in the economy or freak incidents like September 11. Some investments do down in value due to macro economic factors that may have nothing to do with your particular investment. A contrarian investor would spend time looking for ominous signs in the papers which may lead to a downturn so as to purchase stocks, shares at a discount to the average price.

Downturns that can prove profitable include:
• Natural Disasters that have nothing to do with the underlying stock.
• Cross Border Disputes affecting a particular Company’s price which has nothing to do with its main operations.
• Wars and Hostilities that can affect the competitors of your current favourite stock.

3. Look out for excessive exuberance

Contrarian Investors know that downturns can also be profitable if you use Put options which pay you when the underlying stock declines in price? The best way to predict such a downturn would be to look for in the words of the former Chief of the Federal Reserve Allen Greenspan, “excessive exuberance”. This means basically that while prices are still rising furiously, the number of buyers would start decreasing and a market correction might follow.

Some indicators of such excessive exuberance include:

• When you see financial analysts being very rosy on highly speculative stocks.
• When the stock market indexes start rising close to record highs.
• When you notice that trading volume diverges with the price, meaning that while prices are rising, the trading volume is dropping.

Contrarian investing is thus a mindset where the individual looks for trading opportunities which can yield profits. A contrarian investor thus looks out for economic, political and other factors which can cause a large market movement in the particular financial instrument that he is trading in and can make a large capital gain from his investment. This form of investing can be part of a larger investment strategy and one should consider contrarian investing as part of his online investing warchest today.

Copyright © 2006 Joel Teo. All rights reserved. (You may publish this article in its entirety with the following author's information with live links only.)

Joel Teo writes on various financial topics relating to Ahwatukee Real Estate Investment. Signup for his free online Real Estate Investing newsletter today and gain access to the “Six Day Real Estate Investment Profits Course” now at www.realestateinvestment101.info/Ahwatukee.html

Building Wealth With Real Estate Investing – Three Simple Strategies

Building wealth with real estate investing is one hot topic that is at the back of everyone’s mind these days with property investment training seminars running advertisements in the major newspapers. This article will highlight three simple strategies to build wealth

Cash Flow Properties

Building wealth with cash flow properties is a simple concept. However, looking for a high rental yield property takes some time and education. Focus on looking for properties in high demand areas with higher than average rental yields. This is critical if you want to ride out the down part of the rental cycle and you want to do a simple maths calculation to see if your current instalment size can withstand the down part of the rental cycle or would it deplete your savings instead. In cash flow properties, you want to find a property that puts a net amount of income into your pocket each month and then go on to find more and more such properties to make you a landlord of even more properties.

Flipping Properties

The best types of properties are those that look run-down but are actually quite easy to spruce up. Spend some time looking for auction and foreclosure type properties which can be spruced up real fast for a quick resale. Do your homework and inspect the house before you buy it because some of them can be real problematic. Take some time as well to figure out the foreclosure and flipping real estate laws in your state because you want to

Land Banking

Land banking is an interesting concept and basically means that you take the risk of the developer’s land bank and when the developer is ready to build and develop the land, he buys it back from you and usually at a few times the rate that he sold the rights to you. This benefits both parties since the developer gets to free up his initial capital and you get a good return on your investment.

In conclusion, we have covered three simple ways that allow you to build wealth with real estate. Take some action today and start seeing your income rise and achieve your lifelong dreams today.

Joel Teo writes on various financial topics relating to Ahwatukee Real Estate Investment. Signup for his free online Real Estate Investing newsletter today and gain access to the “Six Day Real Estate Investment Profits Course” now at http://www.realestateinvestment101.info/Ahwatukee.html

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