Thursday, March 26, 2009

Lucky Guess

When it comes to investing in the stock market, I am not one to follow. I would rather invest in companies I believe in rather than one's that make money. That's why my 401k funds are managed by a stock broker instead of me. He probably knows how to do things much better than I do. But what would happen if I did have some money to invest in the stock market and made the choices myself? That scenario might have worked better than expected.

Eddie, Larry and I used Yahoo's financial page to "invest" approximately $1700 make believe money in the market a month or so ago. The only stipulations were that (1) the investments had to be cheap stocks and (2) we had to charge ourselves $35 every time we bought or sold shares. Having played the board game, Stocks and Bonds, this seemed like a fun thing to do — especially in the current economic market. So, I joined the experiment.

Not knowing the names of any penny stocks, I chose the worst possible stocks available: Ford, GM, Tata Motors, and Volvo Trucks. Things didn't go very well at the beginning. Heavy losses caused me to lose hundreds of dollars almost instantly. But surprisingly, the stock values have risen recently and I'm actually ahead about $250 as of today! I'm not recommending any real investments in the stock market as I have no idea how the thing works. It was just surprising to see how things ended up today.

2 comments:

Frank Sansone said...

Andy,

I find this interesting. I know very little about stocks and the whole investing "game", but I am beginning to think that a lot of it is really a game. Knowing what you are doing may actually be bad for your investments :)

At the beginning of December, I put a "mythical" 20,000 in a stockhouse.com account and tried a few different methods.

The first was based on some actual investments by a broker I know.

The second was based on 10 stocks of well-known companies that I thought might do well that I was familiar with - McDonald's, Lowes, Coke, etc.

The third was selected randomly - or actually, I decided to do ABC, DEF, GHI, etc. (Of course some of the initials I chose had no related stock). I divided the $20,000 between the ones that actually exist (e.g. there is no MNO).

As of today, almost 4 months later, the random portfolio is doing the best - it is up almost $700. My picks are down - but only $30 and the broker's picks are just ahead of mine. (After being behind most of the last two months)

Makes me wonder whether it is more "gambling" than investng - since random and ignorance do as well or better than knowledge. Perhaps that is a discussion for another time :)

Frank

Andy Rupert said...

Equating the stock market with gambling isn't too much of a stretch — especially when you consider the "betting" that seems to have resulted in the current economic difficulties.