ALSO KNOWN AS PAPER TRADING

 A stock market simulation game is a great way to practice your investment skills before actually investing any “real” money in the stock market.

Simulation games are usually played on the internet, where people can experience the thrill of investing in the stock market without any risks, costs or any fear of losing money when and if they make a poor investment decision.   This is commonly referred to as “paper trading.”

Many teachers and professors of banking and finance are now using stock market simulation games to teach their students about the rudiments of investing in stocks. Most stock market simulation games come with a fee to get started, but there are some that are free of any charge.

HOW DOES IT WORK?

First, players must register. After registration, players are given an initial sum of “virtual” money to invest in companies of their choice. Players build a portfolio of stocks by buying and selling shares in companies. Most stock market simulation games use real-time market data.

The objective of most stock market simulation games is simple:

To increase the value of your portfolio of stocks so that it is greater than that of the other game players.

TIPS ON PLAYING

Below are some tips on choosing a stock market simulation game:

• Choose a stock market simulation game that is used and recommended by reputable colleges, high schools, middle school, investment clubs, brokers in training, corporate education courses and any other group of individuals studying markets in the U.S. and worldwide.
• Choose a stock market simulation game that is comprehensive and easy to implement in any Finance, Economics, or Investments class. A good stock market simulation game should feature trading of stocks, options, futures, mutual funds, bonds from the U.S. and many of the world’s major markets.
• Choose a stock market simulation game that provides a valuable, reliable, and realistic trading simulation at a reasonable price to members and other individuals who are interested in learning more about investing and trading. The simulation game should also have some capability for testing a variety for investment strategies.
• Choose a stock market simulation game that has a toll-free customer service phone number and excellent e-mail support for members. The support function should be able to quickly answer any questions that members/players may have.
• Choose a stock market simulation game that is easy to use and easy to teach even to those who have never had any real hands-on investment experience.

There are many good sites and discount brokers that offer stock simulators such as Wall Street Survivor
, one of our advertisers.  Click the ad at the right to sign up for a free account.  You can trade just as if you were in the market and there are lots of great prizes! And you can paper trade stocks, options, and commodities.  It’s a harmless way to “get your feet wet” while you are learning how to trade stocks.  www.investopedia.com is one site that offers a nice investment simulation for free.

COMPANYINVEST.COM TRADING UPDATE 

Both of our recent picks, QID and ERY are doing wonderfully.  We added shares of QID to our position during today’s trading.  Tune in tomorrow for another great stock pick!

WHAT IS A MUTUAL FUND?

A mutual fund is an open-ended fund operated by an investment company, which raises money from shareholders and invests in a group of assets, in accordance with a stated set of objectives. Mutual funds raise money by selling shares of the fund to the public, much like any other type of company can sell stock in itself to the public. Mutual funds then take the money they receive from the sale of their shares (along with any money made from previous investments) and use it to purchase various investment vehicles, such as stocks, bonds and money market instruments. In return for the money they give to the fund when purchasing shares, shareholders receive an equity position in the fund and, in effect, in each of its underlying securities. Benefits of mutual funds include diversification and professional money management.

Our Take: Recent studies have concluded that the over 85% of mutual funds CANNOT beat the annual return of the S&P 500.  So much for professional money management.  In addition, mutual funds are expensive, with front end commissions and several “hidden fees,” that the average Joe has no clue about.  And your performance is dependent on the fund manager buying and selling the right securities at just the right time.  And fund managers do not get bonuses due to good performance; they get bonuses only based on the amount of dollars coming into the fund.  So all their efforts go into getting as many people to buy into their funds as possible.  Also, very few of the strategies on this site can be applied to mutual funds.

WHAT IS AN EXCHANGE TRADED FUND (ETF)?

An ETF is a fund that tracks an index, but can be traded like a stock. ETFs always bundle together the securities that are in an index. Investors can do just about anything with an ETF that they can do with a normal stock, such as short selling. Because ETFs are traded on stock exchanges, they can be bought and sold at any time during the day (unlike most mutual funds).

Their price will fluctuate from moment to moment, just like any other stock’s price, and an investor will need a broker in order to purchase them, which means that he/she will have to pay a commission. On the plus side, ETFs are more tax-efficient than normal mutual funds, and since they track indexes they have very low operating and transaction costs associated with them. There are no sales loads or investment minimums required to purchase an ETF.

Our Take:  We love ETFs.  ETFs charge a fraction of the fees of mutual funds and can be traded just like a stock.  And online broker’s offer very reasonable commissions ranging from $4 to $10 per trade.  Additionally, ALL of the trading strategies you read about on CompanyInvest.com can be used on ETFs.

MORE REASONS TO BUY ETFs

There are two main reasons we love ETFs at CompanyInvest.com:

#1: ETFs have much lower fees than mutual funds.  Over time this can be very significant.  Consider the following example:

Investor A has a portfolio of four of the leading mutual funds with an average expense ratio of 2.16% (Typical of a mutual fund portfolio).  He initially invests $1 million.  His  portfolio yields a 10% annual return.  After 30 years, his portfolio grows to $9.6 million.  Not bad right?

Investor B has a portfolio of four of the leading ETFs with an average expense ratio of 0.19% (Typical of an ETF portfolio).  He also initially invests $1 million.  Let’s assume his portfolio also yields 10% a year.  After 30 years, investor B’s portfolio grows to $16.5 million!

So over a 30 year period, with identical annual rates of return, Investor B has accumulated nearly $7 million more dollars than Investor A.  And that is ALL due to higher fund expenses and other fees over time.

#2 ETFs can be traded just like a stock. This means you can buy and sell them whenever you want, and you can also short them (and make money even when the market is trending down).

ALL of the strategies we suggest on Companyinvest.com can be used with ETFs; but very few with mutual funds.  Once you learn to trade and incorporate trading strategies such as the ones taught on this site, you can beat the S&P 500 100% of the time; not 15% like the mutual funds.

Bottom Line: Participate in mutual funds if your company offers a matching contribution to your 401k program.  But consider opening a ROTH IRA (all the major online brokers such as Scottrade, Etrade, Tradeking, and Sharebuilder) offer them.  You will get much more bang for your buck and if you use the strategies discussed on our site, your annual return can be more like 20% per year, instead of the 10% used in the example above.

With the dollar rallying most of the past week, materials and commodity stocks have consequently sold off hard and US Steel is no exception.  Since October 11 (in just two weeks), the stock has pulled back 13.51%.

Trading is all about finding the right time to buy.  Many investors strictly look at company fundamentals (earnings, cash on hand, debt, price to earnings ratios, etc) to place trades.  Problem is fundamentals will tell you WHY to buy a stock, but not WHEN to buy.  That is where technical analysis comes in.  Using chart patterns and momentum indicators, we can tell when the highest probability of a good trade will occur.  And at Company Invest, we think right now is a great time for a US Steel trade.

COMPANY INVEST TECHNICAL ANALYSIS

“A” is the 3-day relative strength index, a favorite swing trading indicator at companyinvest.com.  As you can clearly see, this indictor is WAY oversold (brown area). Look at what happened the last 5 times the RSI was this oversold (green circles).  Now look at the corresponding green arrows on the price chart that indicate trade entry points.  Each entry point resulted in a minimum of a 10% gain!  And here we are again…

“B” is the daily stock pricing chart (going back to mid May).  “Support” is very important in technical analysis.  Support happens when the big investors (pension funds, hedge funds, 401k fund manager) come in and buy.  We’ve illustrated two key levels of support on this chart (S1 and S2).  US Steel has been trading right at the S1 support level for the past three trading sessions without falling below it.  In this case it means buying the stock at $40 and change is a great entry.  Notice how the $40 level was also key support back on June 7.  And should the S1 support break, the next support level (S2) is the $37 area.

Also, the red selling volume bars have been getting shorter over the last 3 trading sessions while the stock has been basing.

“C” is the MACD histogram which gives nice advance signals for stock directional change.  Although you can see selling momentum has been occurring (stair step down blue bars), it looks as if a bullish divergence is occurring between the MACD histogram and the price chart (green line in “C” Vs. red line in “B”).  Simply put, it looks as if a higher low is setting up on the histogram, while at the same time a lower low has occurred on the price chart.

“D” is the slow stochastic momentum indicator.  At 8.88, it’s also deeply oversold.  Look for the signal line (black) to cross up through the MACD line (red) in the next day or two.  Multi day rallies in the stock occurred the last 4 times this signal was triggered (green circles).

Company Invest Bottom Line:   Grab US Steel (X) here and point your stop loss order in just below support at around $39.95.  A $44 price target could be hit in just a few trading days.

Today marked the release of the September, 2010 Non-farm payrolls report.  The report was awful; worse than expected.  Minus 95,000 jobs in September (the number was expected to be flat).  Selloff imminent right? Wrong.  As I write this, the Dow has eclipsed the 11,000 mark, all indices are solid green, and gold and other commodities are up as well.

Why? There is strong speculation that this widespread economic weakness will lead the Fed to enact “Quantitative Easing, Part II”, or QE2.  This means they will continue a zero interest rate policy and again crank up the money printing press, using those fresh greenbacks to pay off our debt through the purchase of treasuries.  This keeps interest rates low, especially mortgage rates, while trashing the value of the dollar.  Long term this policy will create many problems including widespread inflation.  However, that is a way’s off.  Until then, let’s party like it’s 1999.

Here’s a brief snippet of the past few Company Invest picks:

October 4 (John Deere: DE). What We Said: Get this stock at the $68 level for a quick run to $76.    What Happened: DE did indeed break out and rallied above $76 today for a great trade.  What to do now?:  Take profits and sell 1/2 your position.

Sept 30 (Apple: AAPL). What We Said: The stock is overheated and will more than likely pull back to 272 before resuming it’s upward trend.  What Happened: Pulled back from 285, to 278 (not quite the 272 we were expecting), and skyrocketed.  As I write this it’s trading at $294.  What to do Now? Take 1/4 to 1/2 off your position off and take profits.

Sept 29 (3M: MMM). What We Said:  Stock is in a trading range between $85 and $88.  Sell under $85 and buy above $88.  What Happened:  It broke through the top of the range and is now in a new range between $88.25 and $89.92.  What to do Now? HOLD your position and place a stop below $88.25.

Sept 28 (Alcoa: AA). What We Said:  At $12.22 take profits and let it pull back.  What Happened: Pulled back to $11.85 before taking off after a positive earnings report on 10/7. It is now trading over $13.  What to do Now? Nothing.  Don’t buy this stock until it pulls back.  Don’t chase a train out of the station.

These were some good calls.  Technical analysis is a wonderful thing and we hope you like this information and continue to visit the site.  As always, your comments are welcomed.  Stay tuned for a full week of picks next week as we fire up 3^rd quarter earnings season on Wall Street.

3M is another DOW component and a low beta stock. Beta is a measure of volatility (>1 indicates high volatility, <1 indicates low volatility). 3M comes in at 0.83, which means less violent price swings than the average stock. Although it seems a bit overvalued at a 15.88 P/E ratio (Price to Earnings), MMM has produced solid quarterly earnings and has healthy cash flow. Fundamentally, 3M is a sound company.

 Today’s Technical Analysis:

Looking at the chart, letter “A” indicates a trading range this stock has been in for the past two weeks. Stocks that trade in a tight range after a move up or down are said to be in consolidation. A consolidation could mean a “pause” resulting in a continuation of the move up, OR a “stage 3 distribution,” meaning it could be a prelude to a selloff. Based on the trading range, I’d be a buyer above 88, and a seller if it breaks below 85.

The letter “B” is the stock’s 200 day moving average. Notice the current stock price is significantly above the 200 day moving average. That is bullish mid to longer term, meaning there could be a pullback in the near term, but most likely you should buy on the pullback as there is a high likelihood the stock will resume its advance.

“C” is a 19/39 moving average crossover. Simply put, when the 19 (blue line) crosses up through the 39 (red line) it is a buy signal. When the 19 crosses down through the 39 it is a sell signal. So the “buy” signal is intact.

“D” is the 3 day RSI (Relative Strength Index). RSI measures the strength of the stock based on its recent price history. This chart shows that the RSI is rising and not overbought yet (above 70), so the stock could still move a bit higher.

Finally, “E” is the Slow Stochastic indicator. Slow stochastics are a momentum indicator. >50 is considered bullish, while <50 is bearish. >80 is considered overbought, while <20 is considered oversold. The indicator current shows the stock still has positive momentum, which is in agreement with the other indicators.

Bottom Line: “Hold,” but you could also buy now and place a stop loss order below 85, meaning if the stock breaks down below that level, your shares will automatically be sold, limiting your loss.

Simulating the stock market can be a lucrative and educational way to learn the fluctuations and risks before actually doing the investment at the first place. With this way, you can get accustomed with the stock market and foresee the upcoming development before it happens.

Simulating stock market can usually be played on the internet and you can invest virtually by not risking your money without any cost if you make bad investment choices. This practice is actually recommended in the schools and financial institutions to learn the real environment of stock before actually “entering” in it. The simulation games comes with subscription fees as a starting cost or you can play it for free in most websites. Most of them doesn’t need to have a prior knowledge of stock market. In these website, after you register to the website, you are given some virtual money to invest any company you want in the stock market. You can build a portfolio with the companies that you think they will be most successful. Time to time, you get real time data on your investment to learn whether you earn or lose money.

To use the simulation games, you need to check the closest university or financial institutions to learn which simulation website they are recommending. And then, register the website and choose your investment on which class will be assessed. The investment classes can be either in finance, economics or investment class. You can get information about how to trade stocks, options, futures, mutual funds from US or other countries’ stock markets. The simulation game also should be easy to use, reliable and flexible to use different strategies if something goes wrong.

Overall, simulating the stock market is a great way to get accustomed to stock market and learn how to earn most money on the stock market.

The last economic crisis of the global stock market cost the investors a lot of money. Majority of investors lost money, retirement funds melted away and unemployment rate went sky high due to lay off in the manufacturing plants.

Because of the fluctuations in the stock market, investors seek for alternative ways to protect their investments. This driving force increased the global real estate market rapidly. If you haven’t consider investing to real estates globally, here are tips to increase your profits from real estate investments.

1) Think of Real Estate Globally. Do a research on what country can have a potential for economical growth. While developed countries such as USA, UK, Europe and Australia real estate markets are slowing down, developing countries like Bulgaria, Croatia and Turkey have a booming real estate market right now. You may need to do more research on possesing property and tax regulations in the given country before buying a property to compare the potential cost of ownership.

2) Assess your plan to make sure that it is profitable.  Think about the potential future political and economical changes before buying a real estate. With a proper plan, you can predict the market fluctuations and protect your investment.

3) Plan for the worst. When you make a plan, it is important to think about the worst as well. With this way, you can plan anything that can be possible.

4)  Consult an expert before the final investment. A real estate agent can save you thousands of dollars when you buy the property. With this way, you may save a lot of money and learn the market quickly.

5) Buy what you can afford. Most people like to buy what they want. An investment that fits to budget always prevents a possible future bankruptcy if something goes wrong. Ideally, a conservative budget is preferred when buying a property. With this way, you can have extra money for the unpredicted expenses for the property.

Finally, make a budget by adding all possible costs to own the property such as legal fee,s, real estate agency fees, taxes, etc. You also need to think about the potential renovation costs if you need to. Overall, real estate is a great way for investments and you can achieve your goals by using our recommendations to prevent surprises.