I’ve participated in a few stock market trading/investing competitions. Some are better run than others, but the biggest problem with them all is the limited time-frame.
Speaking of limited time-frame, this is my biggest pet peeve since it has two major flaws:
1. Go Big or Go Home mindset
By all means, I admit I do abuse this. The “Go Big or Go Home” mindset is what I like to refer to as taking an unrealistically large position on a “hot” stock and just riding the uptrend because everybody makes money in an uptrend. As much as I hate this, I do this because the limited time-frame means one must take significant risks in order to rank. Otherwise, your measly 15% gain means nothing when somebody else is turning over 300 to 400%. Realistically, probably nobody would do something like this with real cash.
Speaking of me, I typically do this in one competition and one competition only. The competition I am speaking of is the TMX Options trading competition, which is hosted once per university semester. Problem with this competition is that it simulates trading in the Canadian options market, which isn’t the most popular of its kind. Let’s just leave it at that. In terms of how I leverage this mindset to my advantage, every year there always seems to be one major mover. I think three years ago it was Canadian Oil Sands, two years ago was Valeant, and last year was probably defense/financials. I’m going to brag a little, but I did have Valeant puts in place for this competition riding it all the way from the 220 strike (Canadian).
So much to my dislike of everybody utilizing a strategy like this, here I am competing in another stock market challenge. This challenge faces what I believe to be the second major flaw.
2. Not a true test of investing
Every time the topic of investing comes up, it refers to a longer period time-frame. Nobody “invests” for two or three months. You need to commit years, well at least one year to say the least.
I understand the difficulty of organizing a true investing competition since most participants will probably lose interest if a competition runs for the span of five years. At the end of the day, I guess I will just have to make do of what I’m dealt with.
So what is this competition and what was up with my long rant?
The Capitalize For Kids competition engages the investing community to support life-changing children’s brain and mental health programs. As a non-profit organization, they grossed over $1 million in support of the Centre for Brain and Mental Health at SickKids. The projection is to raise $4 million per year by 2021. As a friend referred me to this competition, I set up my fundraising page and reached $100 in donations courtesy of said friend and now it’s time for the competition to begin.
As much as I have concerns for virtual stock market competitions, this is one I decided to participate with a bit more seriousness. The structure is a bit better aside from the fact that it runs from October 2nd to December 29th, 2017. The challenge winners are not solely based on their performance, but also a written component that outlines the portfolio strategy and analysis of the stocks in their portfolio. I think this would provide a disincentive for anybody trying the “Go Big or Go Home” mindset since it would be pretty difficult to explain why all your eggs are in one basket.
Sponsor and platform
This competition is being sponsored by CIBC Investor’s Edge so I do get to take the IRESS platform for a spin without committing any real money deposits.
Interested in competing or fundraising me?
This competition is free to enter, but instead all participants are required to raise at least $100 for children’s mental health.
If you are interested in competing, here is the link below:
If you would like to join my campaign and donate, here is the link to my fundraising page:
I appreciate all the support!
Why am I blogging about this?
I admit I’ve always had more of a “trading” mindset probably due to the nature of how the FX market is. I do look for more exposure to the investing side and this is one of those ways of getting it. I admit I have a lot to learn. I don’t know much about doing comparable company analysis, discounted cash flows, industry analysis, etc. What I do consider myself to be better in is looking at the macro-economics. I hope to incorporate what I know with a little bit of research to see ultimately how I place in this competition. I have created a separate category called “Capitalize4Kids Competition” where I will be documenting all my investing decisions and reasoning I made when making particular trades.
So what is my strategy?
Given the investing period of three-months, my strategy is simply looking at short-term macro economic and industry stock drivers. I will try to refrain from doing any earnings play as I believe that requires a lot more in-depth company and industry level analysis.
As the competition begins tomorrow, let’s put my $1 million in virtual cash to good use!