Playing in the Stock Market…Virtually Trading
I’ve mentioned several times that on of my favorite classes while I was in college (specifically business school) was finance with Professor Jim. And I’ve mentioned that my favorite project in that class was the stocks project. I learned that I needed a portfolio with at least 18 stocks to get 90% diversification. To fully optimize that portfolio, we went a step further and used the Markowitz’s Modern Portfolio Theory (MPT). This takes and looks at the risks and returns of each stock and determines what the weight by share of each stock will be that will produce the most return from the portfolio. We produce an efficient frontier with our stocks and those stocks near the upper part of the curve on the efficient frontier are the best stocks because they give the greatest return for a given amount of risk.
We didn’t exactly have the curve we were looking for but I did choose 18 stocks. They weren’t exactly diversified either. My stocks were too closely correlated, which means that I had room for improvement in my portfolio. However, I had to note that there is a downfall to MPT and that is that no individual stock in a portfolio is completely independent of another stock within the portfolio.
With all the knowledge that I gained by doing the project, I wanted to go buy stocks. But stocks aren’t cheap, and I’m no pro. I realize that in order to gain I have to take risks. But there’s some days where money is a little larger risk than I’m willing to take. I am willing to play in the virtual market though. And there was nothing like the incentive of $100,000 in virtual money to help me along. I’m serious, MyWallSt.net gave me $100k in virtual money, to buy virtual stocks that follow the movements of the real stock market. It’s a learning environment. One that would’ve been awesome when I was in Professor Jim’s class. I was flying blind mostly when I was doing my project. I mean there were books and published articles that I was reading to help out in my research, but it was out dated.
It would’ve helped to been able to talk to people in realtime, to have had current opinions on stocks, to have been able to ask questions. I mean, I did go over and beyond on my project when I ventured into MPT but to have been able to ask an expert about it. Now that, would’ve been cool and the news would’ve been current.
I hope that when I have to take finance in grad school and we get to the section on stocks that I’ll be able to speak up and not only sound smart, but be smart because I know what I’m talking about because I’ve played in the stock market and I’ve had gains and loses and I’ve learned and I’ll have something to show for it with a growing portfolio on MyWallSt.net and that I’ve reached out and built business relationships with other stock traders. That would be ideal, to take what I’ve already learned, and grow on it, and learn so much more and have something to show for it. And maybe to go as far as eventually starting to play in the real stock market because of my learnings and friends at MyWallSt.net.
