I tried to play the stock market and it went terribly wrong

11 September 2019

Playing share trading games is good fun and informative, but we should all just stick to cheap tracker funds

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I  have learnt that I am a terrible share trader.

Working in financial journalism and constantly reading investment information, I had pondered for some time whether this fund management malarkey was really such a big deal.

“What if, I could just do it myself?” I thought. So, I decided to conduct a little experiment. And here I am, dear reader, to tell you the results.

A year ago, I set up two virtual investment portfolios using apps I found on the Google Play store: Best Brokers and Invstr.

Best Brokers allows you to buy €25,000 worth of fictional shares. I put together a portfolio of shares in companies around the world, including hot stocks like Apple, Netflix and Facebook, and lesser-known firms like Anta Sports, Lonza Group and Twilio.

However, a month later the stock market crunch of mid-October hit and the portfolio’s value sank to just €22,327.05 by the end of 2018.

But at the beginning of January, it bounced back. At its zenith, the Best Brokers portfolio was worth €28,218.64, a healthy 12.9% gain! Alas, it cratered again and I am barely breaking even at €25,411.08 at the time of writing. A dismal 1.6% gain.

Now, on the Invstr app I put together an even more radical portfolio, dabbling in weird things like palladium and soy bean futures and even cryptocurrencies.

I also tried shorting stocks. This is where instead of buying a company’s shares and hoping they rise in value, you sell the share and hope they fall. Alternatively, you borrow shares from an investor, hope they fall in value, then pocket the difference when you give them back.

I’d seen films like The Big Short and Wall Street; and various Netflix documentaries like Betting on Zero and Dirty Money and decided that being a short seller was a gritty yet glamorous pursuit.

I shorted coffee futures for a while – that went terribly. I heard bad things about an estate agent called Countrywide and made a 30% gain on that one. I shorted the pound against the euro for a while too.

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I found that when my portfolio performed badly, I would start making riskier decisions to try to cover my losses and this led to yet more poor choices.

For instance, at one point I saw a tip on Twitter that Donald Trump was about to impose tariffs on European car manufacturers, so I liquidated my entire portfolio and shorted stocks including BMW, Renault and Volkswagen. President Trump’s assertions never materialised, and I lost a lot of imaginary money.

The Invstr app starts you off with $1 million in cash. As I write, my portfolio is worth $1,048,039 – a 4.8% gain. But the frightening thing is it fluctuates in real time, losing thousands of pretend dollars in an instant. This induces emotions no one should have to face when investing.

At the same time that I opened the two virtual portfolios, I opened a Stocks and Shares Isa with real money. I opted for Charles Stanley Direct, principally because I would be investing £50 a month to start with and the CS Direct Isa fee is very competitive for low-value accounts.

As this was my real, hard-earned cash, I invested far less recklessly. I bought £50 worth of Finsbury Growth & Income, a Moneywise First 50 investment trust with an ongoing charge of 0.67%, and set up a £50 a month regular investment in Fidelity Index World, a tracker fund with a miniscule 0.12% ongoing charge.

To date, it has returned 9.08%. Of course, it has fluctuated but I haven’t been tempted to meddle.

If creating a share portfolio is something you’ve given thought to, I highly recommend trying out an investment simulator first.

It may reveal, as it has with me, that you’re not quite the stock picker you think you are. Moreover, you might be able to get your gambles and inevitable mistakes out of your system when the stakes are lower, rather than experimenting with your own cash.

Best Brokers was rudimentary but good at showing performance over a long period. Invstr is much more interactive and has loads of functionality, but you have to pay £1 a month to get access to the ‘premium features’.

For my part, when investing real money I’ll be sticking with the cheap tracker funds and investment trusts I can just set and forget. It’s a lot less stressful.