Where losses and gains are fun and games
I am loving those crazy new triple-the-market ETFs they have in the United States.
Here in Canada, we have a series of exchange-traded funds that give you twice what the market does on the up or downside in a given day. You know the Americans – if double is good, triple is better. Enter the new Direxion family of 3x bull and bear ETFs.
I invested close to $100,000 (U.S.) in four 3x bull ETFs on Tuesday and a little more than 48 hours later I sold to lock in a profit of 9.3 per cent. Not bad, eh? Too bad it was all in a virtual world where both gains and losses are nothing more than fun and games.
We’re talking here about online stock-trading simulators, where you trade stocks with imaginary money and then monitor your results. These simulators are the best toys ever if you are:
A student of investing who wants to explore different ideas with zero risk of losing money;
A new do-it-yourself investor who wants to practise trading before getting into the real markets;
An aspiring hotshot trader who wants a low-stress way to test ideas and strategies, and to match wits with other investors.
Don’t confuse trading simulations with the online portfolio trackers that most financial websites offer. Whereas you input the stocks you own into a portfolio tracker like an accountant, with a simulator, you start by making actual trades. That means thinking about what type of order to place and whether you’ll buy on margin, which means you’ll borrow to pay part of the cost.
I set up my portfolio of 3x ETFs on Wall Street Survivor (wallstreetsurvivor.com), which claims to supply U.S. business schools with stock-trading simulations for MBA students to use. The website is designed to work just like an online brokerage account, and that’s exactly what it does (truth be told, it works better than some online brokers I’ve tried).