Why You Should Open a Practice Investment Account

by Mike on July 16, 2012

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Investing can be difficult to learn, and it takes a lot of time and practice to be able to make consistent returns on your investment.  Like any skill, practice makes perfect, and investing is no different.

I’ve seen a number of friends squander this paycheck trying to play daytrader over the years. One friend was even forced to get a loan from Netloans.co.uk just to make his mortgage payment. So, instead of wasting thousands of dollars practicing with real money, you should consider opening a practice investment account so that you can make trades based on real information, but with practice money.

Hone Your Investment Skills

A practice account is a great way to learn how to invest, get used to investing systems, or practice advanced trading strategies.  If you’re new to investing, a practice account is a great way to get started.  I suggest using the account to get used to buying stocks and ETFs, and see how your portfolio does.

If you are a seasoned investor, a practice account can be a great way to practice new investment systems or trading strategies.  Maybe you want to start options trading or spread betting, but don’t want to waste a lot of real money learning how to do it.  That is where practice accounts come in very handy: you can use the paper money and place trades until you are used to how the market and investment products work.

Where to Get a Practice Account

You can find practice accounts at most major brokerage firms, but you want to make sure that they have the features you want.  Some practice accounts are more like stock “watch lists” than actual practice accounts.  When looking for a practice account, make sure it has all the features you are looking to use.

For example, UpDown.com offers a full practice account that includes all the systems of their regular trading platform.  This allows you to not only get used to the investment product you are looking to practice with, but you can also get used to the system the broker uses to place your trades, including what research tools they offer, and how they structure their trade system.

By using a practice account, you can save yourself thousands of dollars in losses because practice makes perfect!

Photo by fau on Flickr.

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