YOUR PORTFOLIO Practice portfolios new investors who took on too much risk may have become disillusioned , others will have concluded , rightly , that they were not investing but speculating . This would have also demonstrated the strengths of any defensive holdings in their portfolio .
“ Any practice portfolio should be designed with that in mind ,” Morgan adds . “ Include a variety of share types but also other assets that help balance things out to teach the benefits of diversification .” Aside from the enormous amount of money saved by someone who confined exposure to speculative assets to a practice portfolio , they would also have benefited from avoiding poor emotional behaviours that can stem from heavy falls
Learning the hard way
The experience that 16-yearold student Louis has had with practice portfolios shows that while they are useful , nothing prepares you for the real thing . He began experimenting through buying shares on a practice investment app , but unfortunately it didn ’ t account for a factor that can play a pivotal role in determining long-term returns – trading costs . These came as a shock when he started investing for real .
“ It ’ s a big problem , as I was only investing £ 30 a time and the trading fee was about £ 10 ,” he says . “ My shares would have to go up a lot just to get that back .” He has now diversified into funds , which don ’ t charge trading fees on the platform he uses .
Despite Louis ’ young age , he appears better informed than many first-time investors : when markets fell shortly after he started putting money in , he decided to add more rather than panicking and pulling it out .
But Louis attributes this to his own research rather than his prior experience with a practice portfolio . He says this also helped steer him away from speculative assets such as cryptocurrencies .
“ I ’ ve read a lot of books about investing and none of them talk about crypto ,” he adds . “ There ’ s not enough evidence it works .”
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