investing

4 tips for buying stocks with 'play money'

Do your research before buying
Do your research before buying © Zadorozhnyi Viktor/Shutterstock.com

Even though you've set aside money that you can afford to lose, the aim is to make money, and that means you should do research before purchasing any investment, experts all advise.

That could entail accessing professional analysts' research reports as well as recent articles in the business press to glean ideas on a firm's prospects, says Stephen Lukan, a financial planner with John E. Sestina and Co. of Columbus, Ohio.

Despite your due diligence, some stocks will sink rather than surge as you had expected, prompting one of your more difficult decisions -- whether to hold your stock or sell it at a loss.

"Research shows that people feel the pain of a loss more than the (joy) of an equivalent gain," Mintel Group's Menke says.

Experts stress that investing is more than an intellectual exercise. It also requires introspection.

Many planners welcome clients trying their hand at investing because of the new insight gained. "People realize how difficult it is to build a solid portfolio," Lukan says.

Rand Spero, president of Street Smart Financial, LLC, in Lexington, Mass., agrees: "It helps you make more intelligent decisions with your adviser."

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