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If you're an investing beginner, the prospect of putting your money at risk can scare you to death. To get yourself used to how the stock market works, you might want to give your investing strategies a practice run before you actually invest real money.

Enter mock portfolios
While you get comfortable with the mechanics of investing (such as researching companies and deciding when to place your buy and sell orders), you can see how your decisions play out, though it might just be over a short period. (Remember that you shouldn't necessarily draw many big conclusions from how a stock or the market behaves over a few months or even a year or two.)

To build a mock portfolio, just set up an online portfolio, which you can do for free at many sites, such as AOL or Yahoo! Finance. Enter details such as when you "bought" shares of this or that, and at what price. Then track your performance over time, observing how your holdings behave over time. This can help you learn more about yourself as an investor.

For example, General Electric (NYSE: GE  ) shares recently had a huge one-day drop after the company reported disappointing quarterly earnings. If you had invested $5,000 in GE stock shortly before, you'd have lost more than $500 in a single day.

Would that kind of quick loss freak you out? If so, you might want to keep reading and learning more about the stock market.

For the experienced
Mock portfolios can also assist more seasoned investors. If you read about some intriguing investment strategy, you might see that it worked well in the past (via some published report based on back-testing), but you might reasonably want to see how it works when you try it yourself. You can do a trial run with a mock portfolio.

If, for example, you want to see what happens if you invest in large-cap stocks that have earned a top rating of five stars in our free Motley Fool CAPS service, and that are down more than 70% over the past year, you can do so in a mock portfolio while you deliberate more about the strategy. By the way, here are some of the companies that come up on such a screen:

  • Coventry Health Care (NYSE: CVH  )
  • Sigma Designs  (Nasdaq: SIGM  )
  • SandRidge Energy (NYSE: SD  )
  • Manitowoc  (NYSE: MTW  )

Of course, if the idea of all of this effort is starting to make your head hurt, know that there are other work-arounds. You can skip mock portfolios altogether. You might simply invest in a broad-market index fund, such as one based on the S&P 500. It's very easy, you can add to it over time, and it will outperform the majority of managed mutual funds. There's no shame in that!

If you'd like to aim higher, though, consider letting us do much of your homework for you, via our investment newsletters. Our Motley Fool Stock Advisor newsletter, for example, has been around for more than five years, and its picks are, on average, trouncing the market -- even this recently pathetic market. Try it for free and you'll be able to read about every recommendation.

Longtime Fool contributor Selena Maranjian owns shares of General Electric. Sigma Designs is a Motley Fool Rule Breakers recommendation. Coventry Health Care is a Stock Advisor recommendation. Try our investing newsletters free for 30 days. The Motley Fool is Fools writing for Fools

Read/Post Comments (2) | Recommend This Article (15)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On October 13, 2010, at 2:07 AM, syrasen wrote:

    With the help of Online Investing Education and the Investing, Stock Market and Financial Planning Tutorial we can learn how to invest money in a proper way. These tutorial and guide provice us all the free information and financial advice, so that we can learn to invest profitably in stocks and be able to successfully manage our financial future. With the Investment Guide that help us easily acquire many new profitable investing skills and expand our economic, savings, financial, investing and stock market knowledge. With the help of Stock Market Guide inwhich we know Profitable Investment that present a clear, easy and safe investment e-Book and educational method by which we will be able to invest profitably in the stock market. With the help of Profitable Expert Financial Services, Investing Advice, the Professional and Expert Stock Brokers and Financial Advisers we can learn how to invest.

  • Report this Comment On December 28, 2010, at 1:16 AM, Johnexo wrote:

    There are many options available for investment. You can choose to put your money in government or private sector. Similarly you can also invest in properties like land and building or in bonds and other financi al instruments that yield interest.Your locality may have specific sources for micro cap investing money. Information pertaining to this can be had from the local market. If you wish to learn to invest money you must get to know the ways to invest money, and the place to invest money or where to invest money.

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Related Tickers

5/7/2013 4:45 PM
CVH.DL2 $0.00 Down +0.00 +0.00%
Coventry Health Ca… CAPS Rating: *****
GE $28.98 Down -0.09 -0.31%
General Electric CAPS Rating: ****
MTW $4.28 Down -0.06 -1.38%
Manitowoc CAPS Rating: ***
SD.DL $0.00 Down +0.00 +0.00%
SandRidge Energy CAPS Rating: ***
SIGM $7.56 Down -0.06 -0.79%
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