How to win at playing sharemarket games

One thing you should be aware of when playing any sharemarket games is that they don’t imitate real life trading. While most do their best to stimulate a real life trading environment, we all know there is a difference between a virtual $50,000 or $10,000 and the $50,000 you spent 10 years saving with blood and sweat.

Also for most people, investing in the sharemarket means investing long term, not the 8 or 10 weeks most these games operate for. Long term investing means diversifying and reducing risk. However, this strategy will never win you any games as it will only give you average returns.

Strategies to win at sharemarket games

Whether you are playing the ASX sharemarket game or the Stockwatch.com.au share game, here are my strategies at winning:

  • First thing you need to realise is that you need luck and lots of it. Forget skills, luck is your biggest friend. Timing is also important, just as important as picking the right stock and if you’re are lucky enough to buy the right shares at the right time, you’re well on your way to winning
  • Invest in ALL your available money, in most sharemarket games, money not spent will be treated as cash in the pocket, ie no interest, no returns. Even in cases where the game allows cash to earn interest, it will NOT beat the returns of shares
  • Diversification is the key in real life investing, however in sharemarket games you can throw that out of the window. The aim is not to protect your “virtual” money but instead try to get the biggest portfolio as possible and if it means going broke trying, so be it.
  • When searching for what shares to buy, start by looking at a specific sector. What you want to look for is a sector that is most likely to be on its way up. Of those sectors that are on its way up, look for ones that are very volatile. In my experience the Energy/Materials sector, Mining (M) industry is your best bet. The Financials/Real Estate industry, especially staples securities, property trusts is also good. Also look for companies that are possible takeover targets
  • Once you have chosen you the stocks you want to buy, buy the minimum of stocks allowed. For example if the game is $50,000 with no more than 20% of each stock in one company then choose only 5 stocks, certainly no more than 7. Remember the aim here is not to diversify. Mathematically it’s harder to pick 7 stocks that will go up 50% than it is to pick 5 stocks. So keep it to a minimum
  • Do not buy/sell too often. Once you have chosen you desired stocks keep them and wait it out. Most sharemarket games charges brokerage costs and they all add up. If you buy/sell 10 stocks that’s 20 transactions, if brokerage is $30 that’s $600 or 1.2% of your money gone!

Ok so those are the strategies I use when playing. Remember when you are competing amongst thousands of other budding investors you need to go all out attack. Sharemarket games are similar to poker, those who play conservatively will never win, they’ll end up above average or so but will eventually lose because their pot is just not large enough to win.

If you follow the above strategies your chance of winning will increase, albeit slightly. One great thing about playing sharemarket games is that many offer rewards or cash prizes. Personally I have won a few hundred dollars playing so even though they are not “real” they are still fun and rewarding.

The two biggest sharemarket games that simulate the Australian share market and offers cash prizes are:

  • Stockwatch.com.au - Share Trading Game – Excellent game, user friendly, great community, offers cash prizes, sign up any time.
  • ASX Sharemarket games – by far the biggest sharemarket game out there, real time data, great prizes. Make sure you are aware of the start dates and join before entries closes.

Tools:
Finance.yahoo.com
, Finance.google.com, Businessday.com.au,
http://www.incrediblecharts.com - Free sharemarking charts
http://www.stocknessmonster.com/ - Market Depth Info, nice layout, easy to use
http://www.aegis.com.au - Calender of events [dividends] , Great for upcoming dividends
http://www.google.com/finance?q=in... - Look at how well the market is doing for each sector
http://www2.standardandpoors.com/ - Companies listed on he S&P/ASX 200, get these stocks for less risk
http://www.sharefilter.com - Use to filter shares by whatever criteria you want