Sharemarket Game
Investment tips
The first step to successful investing is to set a winning strategy. Here’s how to get started.
Participating in the sharemarket game is a lot like investing in real life. Both in the game and on the markets, an important first step is to set clear investment goals, then design a strategy to achieve them.
Of course, there are also some important differences. The game only includes some of the companies available on ASX (300 versus more than 2,000). And the game only runs for a limited time, so everyone who joins has the same, short investment time-frame. Both of these differences will affect your game plan.
Nonetheless, participating in the game is a great way to set and test your strategy, and to think about the kinds of issues you need to consider for longer term investing. Here are some of the most important.
Shares can offer two types of return:
In real life, you’ll want to consider which is most important to you, depending on your personal situation and your investment goals. In the game, you may want to benefit from both, or to focus purely on growth.
To receive a dividend from a company, you need to buy its shares before the ex-dividend date, or “ex date”. Remember that a share price may fall by the dividend amount on or after the ex-date, since anyone buying the share after that date won’t receive the dividend.
All investments carry some risk, but not all investments are equally risky. In general, the higher the potential return, the higher the risk. For example, a large, mature company paying regular dividends may have less growth potential than a small startup in an untested industry, but its share price is also likely to be more stable.
Only you can decide how much risk you’re comfortable with – both in the game, and in the real world. You also need to consider how to manage risk, and whether you will sell any shares that underperform. One of the most effective ways to manage risk is to diversify your portfolio across companies and sectors.
Go to Resources > Dividends+ to view a list of upcoming dividends and other corporate actions affecting companies in the game, including those affecting your portfolio.
In the game, you can use a Falling Sell to automatically sell shares that fall in price to limit your loss, even when you’re not monitoring your portfolio.
Next, you’ll want to think about economic trends and upcoming events that may affect a company’s performance during the life of the game. That includes both:
Broad economic factors, like changes in government policy, unemployment data, consumer and business confidence, retail sales trends, or changing commodity prices. Look out for upcoming announcements, and consider how they could affect your portfolio.
Company specific factors, like earnings and performance updates, dividend payments, new products or discoveries. A positive or negative announcement can lead to rapid changes in a company’s share price.
An investment strategy is not something you can just set and forget – especially when your time frame is just 15 weeks.
In past games, the most successful players have spent about 30 minutes a day researching stocks and monitoring their portfolios. Of course, not everyone has that kind of time – and research shows that long-term share investors often check their portfolios much less regularly. All the same, it’s still important to monitor your portfolio’s performance and update your strategy if it doesn’t look like achieving your goals.
Don’t forget to look out for upcoming events that could affect your portfolio – both macro factors, like economic news, and share-specific factors, like dividend payments or company announcements.
Before deciding to invest in a company it makes sense to learn more about the company’s growth and profits – and how sustainable they are. You should also learn about the company’s risks and its level of debt.
One way to do this is through fundamental analysis. By looking at key financial data you can learn more about a company’s past performance and how it may perform in future.
Investment professionals use a company’s fundamentals to compare its performance with its competitors. This helps them make investment decisions, such as whether to buy, sell or hold stock. They do this by working out the following:
Where to find a company’s fundamentals
To find out information about a company’s fundamentals:
Technical analysts believe that a share price reflects key information about a stock – who’s buying and selling it, the good and bad news about the company and the environment it’s trading in. They use charts to get an instant picture of the changes in prices over time.
Technical analysts also use charts to work out when stock prices are in an uptrend or downtrend, to work out if it’s a good time to buy or sell.
If you compare the line chart version of the spreadsheet, you’ll see how the chart provides a pictorial story of the company’s performance. You’ll notice that charts make it much easier view performance over time – especially when it comes to patterns or irregularities.
1. Use the trend line to map a stock’s price over time.
Go to your dashboard and click on the "Resources" menu and choose "Charts"
2. Check the volume to assess how strong a trend is
The volume simply means the total number of buy and sell orders for shares each day. By charting the volume you can see a share’s activity – and it whether a trend is continuing or reversing.
The volume is represented by the blue bars going across the bottom of your chart.
3. Use charts to compare a share price’s moving averages
The moving average is the average of the closing prices for a set period of time, such as over a few days or weeks. Many technical analysts only buy a stock if its price rises above its moving average, or sell if the price drops below it.
To work out when could be the best buying or selling point of your stock, you can compare two different periods of moving averages. The point where the upwardly moving, shorter-term average crosses the longer term average may be the best time to buy – and vice versa. Remember though that a moving average is just an indicator – and it may not always be right.
The chart compares the 10 and 30-day moving average price of RESMED stock.
Go to your dashboard and click on the "Resources" menu and choose "Charts"
In this section, we get to know the key market indices and sectors. We also explore diversification as an important investment strategy – and the role that ETFs can play in diversifying your portfolio.
Lets look at how you can use ETFs to build a diversified portfolio. But first, you’ll need to know the different market indices and sectors and understand the basics of diversification.
A sharemarket index measures performance over time – by tracking the change in price of a basket of shares. The more shares in the basket, the more closely the index will represent the entire market. Investors can use sharemarket indices to compare the performance of one group of shares against their past performance and against other groups of shares.
There are indices for sharemarkets all around the world. The most well-known is the Dow Jones Industrial Average which measures the share values of the top companies listed on the New York Stock Exchange. The most important indices in Australia are:
Companies listed on sharemarket indices can be categorised in a number of ways – for example, according to their relative size and past price performance. The Global Industry Classification Standards (GICS) are used to group companies into different sectors based on their main business activities.
This enables investors to compare stocks around the world through their industry classification, to get a clearer picture of which area of the market is performing most strongly. It’s then possible to identify individual companies that are driving the performance of that sector.
Diversification is a risk management strategy that mixes a variety of investments within a portfolio. As an investor, it’s a way of spreading your money across different companies, sectors, markets and asset types, to protect against a downturn in performance by having a broader exposure. You can also diversify geographically, by investing in both domestic and foreign markets.
The idea is that a positive performance in one area of your portfolio will outweigh the negatives in another, reducing the overall impact if one or more of your investments performs poorly. Diversification minimises your exposure to a single market to ensure a steady stream of returns from other high-performing investments.
For example, if your money was invested only in the tourism sector at the beginning of 2020, your portfolio would have been negatively impacted by the outbreak of Covid-19. But if you were also invested in other sectors that performed well during the pandemic, such as tech companies or delivery services, this would help compensate.
The Sharemarket Game offers Exchange Traded Funds (ETFs), so you can invest in hundreds of different shares with just one trade. Including ETFs within your portfolio is one way to reap the benefits of diversification and protect your investments against potential market downturns.
An Exchange Traded Fund (ETF) is a type of security that tracks an index, sector, or asset – allowing you to buy a basket of shares or assets in a single trade. They can cover a whole range of markets and assets, both domestic and international, including:
ETFs work by pooling your money with other investors, similar to a managed fund, but you can trade them on the ASX like you do with shares. With an ETF, you’re able to track a range of indices and gain exposure to high-growth areas of the market – for example, by tracking a specific sector index.
Investing in ETFs can not only save you time and effort in choosing shares, but they also offer a simple and cost-effective way to diversify your portfolio. This is because in each trade you get exposure to all the stocks in the index your ETF tracks while only paying brokerage on a single transaction. ETFs can also help you diversify your portfolio across asset classes and markets that would otherwise be difficult or expensive to access.
Wouldn’t it be great if you could get exposure to a huge range of companies – in just one trade? That’s what ETFs allow you to do.
ETFs have been available in Australia since 2001 – and over the past decade they’ve really taken off. In some ways, they’re similar to managed funds. Your money is pooled with other investors, and the actual underlying shares or assets are owned by the ETF provider. But unlike a managed fund, you can trade them on the ASX – just as you would with shares.
ETFs in Australia are typically passively managed. This means the fund manager tracks the performance of an index like the ASX200, or a commodity like gold or oil, rather than actively choosing the shares themselves.
So why would you use ETFs in the Sharemarket Game?
ETFs allow you to invest in hundreds of companies in just one trade. This makes it much cheaper to gain exposure to a range of companies. And it means you can track a range of indexes and gain exposure to various themes or sectors that could give you more growth – which is what you need to win the game.
For example, if you believe sustainability is a high growth area you could invest in an ETF that tracks a sustainability index. Or if you think a particular sector like technology or healthcare is on the move, you could track a sector index.
Investing in ETFs can also help you save time and effort researching and choosing shares.
To find the list of ETFs available in the Sharemarket Game, go to your dashboard, click on Resources in the blue row on top of the page, then choose Company list from the drop-down menu. Click the Search icon and type in ETF. This will bring up all the ETFs in the game.
Of course, before you buy any ETFs or shares, you need to be clear about what your investment goals are. Then you should choose the right mix of shares that help you achieve them.
Let’s look at a real-life example. Say you were approaching retirement and wanted to create a stable income. You’d be more likely to add more defensive stocks in your portfolio.
Also known as non-cyclical stocks, defensive stocks aren’t usually affected by changes in the business cycle. Sectors like consumer staples (think Woolworths, Coles and Coca-Cola Amatil) and utilities (such as AGL Energy or Spark Infrastructure) fall into the defensive category.
Cyclical stocks like airlines, hotel chains, car manufacturers and luxury goods manufacturers tend to be riskier as they’re more affected by changes to the economy. They often provide higher returns when the economy is doing well – but they can suffer during times of recession.
In the Sharemarket Game, the objective is to build your wealth in a short time-frame. So you’re more likely to have more riskier, volatile stocks in your portfolio than if you were investing over the long term.
In the real world, a lot of Australians like to invest in large-cap stocks – mature companies with the biggest market capitalisation that make up the S&P/ASX 50. Large-caps include the big four banks, large energy companies like BHP, and supermarket giants Woolworths and Coles. They’re popular because they’re thought to be a surer thing – especially over the long term.
Interestingly, over the decade to January 2020, mid-caps, the next 50 companies that sit in the S&P/ASX 100, delivered the highest returns with the lowest volatility.
In the Sharemarket Game, you’re focusing on short-term gains. So it might pay to include some of the more riskier small-caps that sit outside the S&P/ASX, which offer the most opportunity for growth.
In Australia, the end of the financial year (EOFY) is June 30. So most publicly listed Australian companies report their full-year earnings results in August and their half-year results in February.
Reporting season – why you should care?
By law, companies listed on ASX must report their earnings, results and forecasts to shareholders during each reporting season.
By listening to earnings reports, you can find out more about a company’s financial position and outlook. And you can also gain insight into industry trends and the direction of the economy.
Shares: risk and benefits
As an asset class, shares tend to perform very well over the long term. But individual shares come with many risks and benefits. Shares are:
However, like any investment shares come with risks. These include the risk that:
Almost 60% of players told us they used watchlists to track companies they were interested in.
You can use the watchlist to follow companies, buy or sell shares directly from the list, view the details of a specific company, or even view your watchlist by sector.
When the market is volatile, it doesn’t make it easy to keep your cool, especially when your portfolio immediately goes into negative, it may have even made you have felt like giving up or making some ‘not so good’ trading decisions.
You may also be finding that one of the greatest challenges when learning to invest can actually be ‘YOU’ and learning to control your emotions. This is an important lesson because as soon as you have your own money in the market these emotions will be amplified, and if you want to be successful in the long-term, you need to learn how to manage the psychology of investing.
You need to learn not to panic…which is a very common response when there are significant falls in the market and in your portfolio.
So how do you do this?
Risk is part of investing – but there are smart ways to manage it.
As we move into the homeward stretch of the Sharemarket Game, it can be tempting to take some risks to boost your portfolio. Investing in a volatile stock may provide the last-minute returns you’re looking for – or it could permanently set you back.
Some risk is inevitable in investing. But you should avoid throwing caution to the wind in real life – as your investment outcomes can have serious impacts on you financially.
So how much risk is OK?
It depends on your income, your age and investment timeframe – as well as the reason you’re investing in the first place.
You should also consider your personal comfort with risk. Can you ride out waves of volatility with relative ease, or do you toss and turn at night? Work out your tolerance for risk – and respect it.
In investing, today's outperformer could be tomorrow’s loser. Social or political events, a natural disaster, rising or falling interest rates, unfavourable exchange rates, industry disruption or changes to commodity prices: all of these factors can impact a company’s share price – as can unfavourable media attention, supply and demand issues or governance problems.
As an investor, you may also be impacted by concentration risk – where you’ve focused too heavily on a small number of companies or sectors. And timing risk comes into play if you need to sell your investment earlier than planned – or you may not be able to sell them at all.
So what can you do to mitigate risk?
It’s vital to protect your capital – your initial investment. (In the Sharemarket Game, your capital is the $50,000 that you started with.) If you don’t, you could lose all your hard-earned money – and also, without those funds, you could also miss out on the chance to build more wealth.
In real life, if you have a long investment timeframe (five years or more), you can take a few more chances, since you have time to rebuild your capital if there’s a market downturn or you make an unsuccessful investment. But in the Sharemarket Game, you won’t have the time to rebuild if you do suffer major losses.
Diversification – spreading your money across companies, sectors, markets and asset classes – is a key way to preserve your capital and protect any returns you make. That’s because if some of your investments perform poorly, others are likely to do well – or at least won’t be so seriously impacted.
For example, if you were invested in travel or tourism stocks at the beginning of the pandemic, your portfolio would have suffered a loss. But you may have been able to compensate for this if you’d also invested in a sector or stocks that outperformed at that time, like videoconferencing companies or certain healthcare stocks.
In real life, you can also diversify your portfolio by investing in other assets too. This could include cash, fixed interest investments like bonds, commodities, foreign currencies or real estate investment stocks (REITs). Many of these investments aren’t correlated with shares. In other words, they’re not tied to the ups and downs of the market.
Remember that for the first time, the Sharemarket Game also offers Exchange Traded Funds (ETFs), which allow you to invest in hundreds of different shares with just one trade. Many ETFs also include fixed income, commodities, precious metals and foreign currencies.
If taking big risks isn’t your thing, consider including more defensive stocks: companies with products or services that are in demand, no matter what’s happening in the economy. Gas and electricity providers, telecommunications, or large supermarkets are all examples of defensive stock.
As well as providing consistent returns, these companies generally pay dividends – which you can always reinvest if you want to grow your wealth.
Consider your timeframe
To win the Sharemarket Game, you may need to invest more aggressively in a short timeframe than you should you in real life. Outside of the game, if you are investing for growth, it’s wise to do it over a longer timeframe – five years or more.
To win the Sharemarket Game, you may need to invest more aggressively in a short timeframe than you should you in real life. Outside of the game, if you are investing for growth, it’s wise to do it over a longer timeframe – five years or more.
Sometimes, you might want to sell a stock if it falls below a certain price. But in the sharemarket, things can change quickly – and a share’s price could fall dramatically within a very short period. And even the keenest of traders can’t monitor the market 24/7.
One way to limit losses or protect any gains you’ve made is by using our falling sell tool. It lets you set a sale price for a stock in advance that’s below the current market price.
Here’s how it works. You set two prices:
To use the falling sell tool, select Place an order from the Resources dropdown menu. Under the Order to heading click on the circle next to Sell. Enter the Order details. Then under the Order type heading, click on the circle next to Falling sell. You can then enter the Trigger price and Limit price of your choice. Once you’ve previewed your order, press the submit button.
Chris Brycki’s experience as a real-life investor and as a Sharemarket game player is impressive. Chris is the founder of Stockspot, an online investment and fund manager. He’s also a three-time winner of the Schools version of the Sharemarket game.
Interestingly, his first crack at the game wasn’t that successful, because he took a real-life approach to investing.
“I bought some very stable Australian businesses like Telstra and Woollies,” he explained. “What I realised is if you buy these really fantastic, stable businesses you’re not going to win the game because they’re not the most volatile companies. Those are the ones that tend to help people win.”
Chris recommends taking much higher risks in the game than he would in real life investing. As well as picking stocks that have the potential for volatility, he also created a more concentrated portfolio – putting most of his money into similar companies rather than spreading them across different industries. This strategy helped him win the next Schools Sharemarket game.
“At that time, there was a tech boom going on, so I focused on investing in tech shares. Then when gold stocks began doing well, I migrated my strategy to gold,” he said.
In real life, Chris recommends taking as few risks as possible. He suggests diversifying broadly across a range of sectors, geographies and asset classes. He says investing in markets is a long-term proposition.
“Investing isn’t a two-week or 10-week game, investing in real life is a year, or two year or 20-year thing, and so timeframes are very different.”
Hopefully you’ve learned more from your experience playing the Sharemarket game. And maybe you’re ready to take the plunge into investing in real life – or build on your current investments. Here are some tips to help you make the most of the sharemarket:
What are you investing for? How much time do you need to meet your goals? This will inform your investment strategy and choice of stocks and sectors. Longer timeframes (at least 5 years) generally mean you can take on a bit more risk.
If the market is in a downward trend, it can be tempting to sell. But if you do, you’re likely to lock in losses. So it can be wise to stick to your strategy and a timeframe – and ride out short-term volatility.
While focusing on one sector in the Sharemarket game can get you short-term gains, in real life you’re better off diversifying your investments. This means investing in different sectors, company sizes (large, mid and small cap), geographies, growth and value stocks and different investment classes, such as stocks, bonds, cash and real estate.
Equity Mates have curated a 12-part series that will give you the confidence to get started investing. It covers the basics to equip you with the knowledge and skills needed to start your investing journey. Listen now
Information provided is for educational purposes and does not constitute financial product advice.
You should obtain independent advice from an Australian financial services licensee before making any financial decisions. ASX Limited ABN 98 008 624 691 and its related bodies corporate (“ASX”) does not give any warranty or representation as to the accuracy, reliability or completeness of the information.
To the extent permitted by law, ASX and its employees, officers and contractors shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided or omitted or from anyone acting or refraining to act in reliance on this information.
© Copyright 2022 ASX Operations Pty Limited ABN 42 004 523 782. All rights reserved 2022.
