Nowadays there are lots of free stock market games that you can play online. Some are run by individual share dealing companies in order to encourage you to open an account with them further down the line, whilst others are run independently. So what the pros and cons of these stock market competitions? Are they worth joining or are they simply a waste of time?
Well let’s start with the benefits first of all. The major one is that if you are a relative newcomer to the whole area of stock market investing, then by taking part in these games you will learn how to buy and sell shares, even if it is only using pretend money.
Furthermore by buying shares in a fictional portfolio you will start to learn about how share prices actually move and how they are influenced both by company-specific news, and by the wider stock market in general. You will also hopefully learn the importance of timing and why you should cut your losses early to avoid losing substantial amounts of money.
Another benefit of these fantasy share trading games are that there are sometimes decent prizes to be won. So if you are an experienced investor, you can use all your experience to try and actually win the whole competition and grab the top prizes.
So there are several reasons why you should think about entering some of these competitions, but they do also have their drawbacks as well. The first drawback is that if you are an experienced investor and you spend several hours researching which companies to buy and sell in your fantasy portfolio, and you don’t win any prizes, then you have wasted a lot of time. This time could have been better spent trying to grow your real-life portfolio instead.
Furthermore although these games can be educational for inexperienced investors, they cannot ever recreate the real-life trading environment where you actually buy and shares with your own money. The mindset is completely different because when it’s your own money you are more inclined to bank profits quickly and cut your losses as soon as possible. Plus of course your strategy will be different because with fantasy games you are generally looking to buy the high risk small-cap companies in order to achieve huge gains and hopefully win the competition.
So they don’t necessarily reflect real-life trading, but ultimately it’s down to you whether you want to spend your time entering these stock market competitions. I would certainly recommend them if you re completely new to investing and want to learn the ropes, but I wouldn’t necessarily recommend you spend too much time on them if you are an experienced investor because your time could be better spent on your own portfolio.