Using Free Stock Simulators: Learn Before You Leap!
Last week’s article was all about the importance of a watchlist and how it differs from a portfolio. In that article, I briefly mentioned how I have a paper portfolio, which is different from both a watchlist and a portfolio with your personal money in it. So what is it? Let’s dive in!
Bottom Line Up Front:
A stock simulator (or paper account) is a mock portfolio that allows beginners (and experts alike) to practice strategies in real-time market conditions without risking real money. This accelerates skill-building for independent investors and reinforces trading discipline without the painful lessons that come from monetary loss. Paper trading is fully simulated investing that uses virtual cash but mirrors live market data, order types, and everything else the actual stock market is doing in real time.
Conditional Benefits
The benefits of having a paper portfolio should be quite obvious, but let’s review them anyway: the ability to practice consistently—which separates lucky trades from calculated ones—the reduction of emotional trading and decision-making, and the ability to test and refine strategies without risk, all with the realistic feel of a normal portfolio. However, there is a discipline that comes with having a paper trading account, and that is treating it with the same seriousness as your real account. If you get too comfortable with the fact that you can’t lose money in your paper account, it removes the gravity of making realistic decisions and calculated risks, rather than making frivolous plays for fun. I have fallen victim to this, and it motivated me to completely restart my paper portfolio.
Important Update
Hopefully, I’ve motivated you to start a paper portfolio or revisit one you may have abandoned. If you’re looking to open a paper portfolio, I wish I could confidently recommend a website that works great—or even close to it—but I haven’t found one yet. However, I have exciting news for Monk Investments in this regard: the Pro tier is getting a complete rework. It will include a range of tools and educational resources, including an interactive mock portfolio for users to paper trade on—and I will ensure it’s excellent in every aspect.