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Learn to invest and win prizes

There are a few fantasy investment games on the internet, but I found one that seems quite good and so started playing the Big Deal stock market challenge this week. There is a prize of £10,000 for the overall player league winner and monthly prizes of £500. The games run for 4 weeks and the next games starts on the 8th of March. You can start playing before then to get some practice.

I began playing on Sunday, just as the new game began. I was given £100,000 to invest and I seemed to have to invest it all in one go. I would have liked to have taken my time. You can invest in shares or funds. The stats today from the game shows players have a lot of cash, so they are looking for good opportunities. I invested the whole £100,000 and made mistakes on Sunday.

The share price you normally see quoted is a mid-price between the price that the market makers sell at the ask price  and the price that they will buy your shares at the bid price. The difference between these two prices is the spread, their profit. I made the mistake of investing in some companies where the spread was too high. When you buy shares, you immediately make a ‘paper’ loss. That loss is made up of the spread, the stamp duty and the dealing fee. If the spread is high, then it takes a big jump in the share price to recover that loss.

Computers now automatically buy and sell shares and this has made the markets more volatile. The market makers (often banks) don’t need to hold such a big stock of shares. The computers can buy and sell and alter prices in a fraction of a second. Prices are governed not only by the perceived performance of the company, but by supply and demand. If demand goes up, then the market makers need more shares to trade and increase the price. This is particularly true of companies on the AIM (Alternative Investments) market. If a small oil company announces that they might strike oil, the share price will jump; if they actually strike oil it can double in seconds.

The big companies with a large market capitalisation are on the FTSE 100 index. These companies are considered relatively safe and are favoured by the funds. As I write this the FTSE 100 index is up 0.11% today. Some companies are up and some are down. News often comes in a statement from the company called an RNS (Regulatory News Service). Good news sends the share price up, bad news will send the price down.

The object of this investment ‘game’ is to increase your capital by the end of the month. Investing is a long term pursuit for most people. You can invest in a relatively safe company with slow growth or invest in a company drilling for oil or exploring for gold. If the small company makes a oil or gold discovery, it’s luck and that sends the share price up. This game relies on luck and so I think players need to invest in some risky small companies.

Many funds and big investors have been looking for safe harbours. Those rock solid safe companies, that they can rely on. This has created a lot of demand and even the big companies have seen their share prices go too high and then plummet when they announce results that aren’t up to expectations.

You can learn about investing by playing this fantasy game. You will learn about, not just about making money, but losing money too. You might lose quite a lot of money in the short term as you lose on the spread, the fees and stamp duty; but longer term you can make money. It teaches you patience and to stay calm. I invest for real and have lost 10% of my portfolio in just one really bad day. That is unusual and it’s taken some time to recover. The reason was simple, I wasn’t diverse enough with my investments. When the price of one company’s shares tanked, I lost badly. Don’t put all your eggs into one basket. You should also think about investing in different sectors too. Don’t invest too much in food or banking or leisure, spread your money around.

I hope I have given you some ideas of how to play and invest. You have some time to play until the next game begins and get experience. One idea might be to put all you money into a safe fund and then sell that little by little and get into shares as opportunities present themselves.

Have a question? Please use the comments box for comments and questions. You can also follow me on Twitter.

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  1. Pingback: The Review: A week of floods | Mike10613's Blog

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