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Paper Investing

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.