Games winners double their money

By Tony Hunter, ASX

The ASX Sharemarket Game is a treasure trove of information on how top-performing investors are making money in this market. More than 54,000 people competed in the two free ASX Sharemarket Games that closed recently.

Data from the games shows some of the top Game players bought and held shares and minimised trading. This is surprising given heightened sharemarket volatility and the view in some quarters that investors need to be more active to take advantage of market conditions.

The next public game registrations open July 1 and the Game starts on July 30. The schools game registrations open July 21 and the Game starts on August 19, so be quick to register your interest (details below).  The ASX Sharemarket Game is a great way to learn about investing and trading without using real money - and lots of fun.

There have been some remarkable performances this year. Ninety-four per cent of players in Game One made a profit and game leaders doubled their starting $50,000 portfolio values. The share prices of 90 per cent of companies rose during a period when the Australian sharemarket was up about 18 per cent. A stronger market helped, but some investors easily beat the indices.

'Buy and hold' on four shares

Take the national and Victorian winner, Carlo, as an example. His syndicate, 'Italian Cashflow', turned $50,000 into $104,454 in 15 weeks. Rather than trade frantically, Carlo used a 'buy and hold' strategy based on four shares: Alumina, Bradken, Geodynamics and Mirvac Group.

Carlo says: "Doing an hour or so of research I noticed that the market was very volatile and many companies were oversold. I decided to take on a four-share strategy and diversify them; making sure I did not put all my eggs in one basket.

"Part of this strategy was that once the shares were purchased they were not to be traded, and were held to the end of the game rather than trading in and out of the market."

The South Australian winner, Barrie, turned $50,000 into $100,861. He also used a 'buy and hold' strategy over four shares for the game's duration: Bradken, Macarthur Coal, Paladin Energy and Fortescue Metals Group.

Barrie says: "For this competition, I picked a sector of the market that had dropped more than the average over the past 18 months, but also one that would increase more than the average when the economy picks up - keeping in mind that history tells us that share prices will recover 50 per cent of their value before 'the experts tell us' the economy is out of recession.

"The sectors were easy to pick. It was then a matter of looking at every share in that group and finding 20 to 30 that had (according to price charts) been grossly oversold. Then I had to narrow it down to four shares that were actually doing what they were supposed to do - they had cash in the bank, were making profits and, if it wasn't for the recession, would be on every fund manager's buy list.

"I recall that six shares stood out, so I picked the cheapest four to get the highest percentage return."

Active trading without research

The New South Wales winner, Howard, took a different approach. He bought shares nine times and sold six times. His active-investing style paid off: $50,000 became $99,503 over the game. Shares bought included: Amcor, Australian Agricultural Company, Fairfax Media, Worleyparsons, Downer EDI, Bradken, Customers, Bendigo and Adelaide Bank, and Macarthur Coal. All were sold expect Worleyparsons, Customers and Macarthur Coal.

Howard says: "When I finally bought shares I had not researched them and as a result my portfolio went backwards about $3000 in the first week. Worelyparsons is the only company that showed a profit in this time, so keeping them from the start of the game to the end was a good choice.

"For the next couple of weeks I bought and sold a few different companies. Then I finally got time to research some shares. I looked for shares that were at less than 30 per cent of their original value before the downturn. Then I just sat on my portfolio for a couple of weeks.

"The only mistake I made during the game, I feel, is the night before the federal budget I thought I should sell all my shares and sit back for a couple of days to see what happens. I didn't sell and the next day my portfolio dropped about $13,000 - a BIG mistake."

A lesson about hype

Queensland winner Kosmas took an even more active approach. He bought 26 times and sold 21 times, and spent more hours researching shares than other state winners - one to two hours a day.  Kosmas turned $50,000 into $96,540. His best buys: Gunns and Bradken.

Kosmas says: "One the most important lessons I learned was, don't get caught up in the hype. Your decisions should be based on the thought, 'Am I buying because I am feeling frenzied by the thought of making quick money, or am I here to make money for the long haul?'.

"The mistakes I made? Not enough knowledge about the power of the media, plus I sold 3000 shares of Bradken and lost about $3000 because of greed to buy another share. The moral of the story is: buy well, wait for a set time and sell at a realistic time and price."

About the author

Tony Hunter is head of investor education at ASX.

From ASX

The ASX Sharemarket Game is one of the world's great real-time trading games and the only type of its kind in Australia. Each player has a notional $50,000 to invest over 15 weeks, with a maximum of 10 orders a day to buy and sell. No more than 25 per cent of the portfolio's value can be held in one share.

ASX Sharemarket Games provides more information on the Schools and Public sharemarket games.  Participants need to be registered with MyASX.