Wall Street Survivor's Free Fantasy Stock Game Proves it's Anyone's Bet in a Volatile Market

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Young Kim, a 50-year old post office clerk knew he was lucky to have a pension, which is invested in index funds. But he couldn't help thinking that his portfolio would be doing better if he could manage the money himself. Then, last year he started playing Wall Street Survivor, a free Fantasy Stock Market game and started to learn how to invest on his own. Kim's instincts proved accurate when his fantasy portfolio value increased 232 percent, earning him First prize and a $14,000 luxury train vacation for two across the American West.

But I guess I did it right.

Young Kim always gets a little annoyed when he looks at his retirement account statements.

The 50-year old post office clerk knows that he is lucky to have a pension, which is invested in index funds, but he can't help thinking that his portfolio would be doing better if he could manage the money himself.

That's why last year Kim, an avid reader of the financial pages of the newspaper, signed up for Wall Street Survivor's free Fantasy Stock Market Game. Contestants are given $100,000 in virtual dollars to build their own portfolios. Winners fall into two categories-traders who make more than 50 trades within the four-month period, and investors who make less than 50 trades. Even though Kim joined in the middle of the contest, he came in fifth place.

So in January he joined again. And this time he proved that his instincts were right. Kim's portfolio value increased 232 percent during the contest, putting him in first place in the trader category. He won a $14,000 luxury train vacation for two across the American West.

If there is one lesson to be learned from Kim and the other top two winners of the contest, it's that there is no sure-fire winning strategy during a volatile market. The top three winners relied on extremely different strategies, yet all realized huge success.

Kim's strategy was to focus on market sentiment and buy the riskiest stocks on their way down, betting that they would rebound.

"When everyone else was panicking and selling, I was buying," he says. "I paid close attention to the news and took risks."

During the last week of January, when markets were crashing around the world, Kim loaded up on home builders, such as Hovnanian Enterprises (HOV), and Beazer Homes (BZH), and financial stocks, such as Ambac Financial Group (ABK) and MBIA (MBI).

That was the week that the New York State Insurance Department began working with banks to bailout a number of bond insurers, including Ambac. The markets rallied and by the end of the week Kim saw his portfolio hit $252,000 from $93,000. A week later his balance was over $350,000.

"It was absolutely tremendous," he says. Kim's ending portfolio was $331,790.85.

The hardest part about the contest, Kim says, was knowing when to sell. "That was definitely the most difficult part for me," he says. "But I guess I did it right."

Dorothy McAuliffe, the contest's second place trader, took the exact opposite strategy as Kim but their portfolios were running neck and neck until the last week of the contest, she says.

McAuliffe, a 30 year-old accountant from New York, says she didn't even open the financial pages of the newspaper at any time during the contest.

"I think if I had read the news I would have held onto things longer than I needed to," she says.

Instead McAuliffe focused purely on pricing trends and chose stocks based on what the metrics told her, she says. "I just went online and pulled up charts and graphs and focused completely on the numbers," she says. "Everything I did was based on metrics."

McAuliffe, whose online handle is "Ilovehl," heard about Wall Street Survivor through her boyfriend, whose hyphenated last name has the initials HL.

McAuliffe did much better than her boyfriend in last summer's contest and even won an iPod. But last fall, she played again and did terribly, she says.

"I was literally close to last place," she says. So this time, McAuliffe decided to take the opposite strategy. Instead of trying to go long on every position, this time around McAuliffe shorted everything.

"I figured if I can't pick the stocks that were going up, maybe I was better at picking the stocks that were going down," she says.

There were times that McAuliffe wasn't sure that her strategy was working. "I remember some days I lost $15,000," she recalls. But she ended up with $311,146--a gain of 213 percent.

McAuliffe is planning to take HL on a trip with the $2,000 in prize money. "We may go some place for the weekend," she says.    

John Pajak, the winner of the investor category, took a very different tactic. The 36 year-old computer programmer, who uses the handle "SolarRules" doesn't have a ton of experience with the stock market so he decided to pick a sector he liked and stuck with it.

"The solar stocks had a lot of potential but were getting beaten down, so my strategy was to buy a lot of solar stocks and let it sit," he says.

China-based Solarfun Power Holdings (SOLF) and LDK Solar Co. (LDK) were two of Pajak's favorites.

Toward the end of the contest, however, Pajak decided to give his portfolio an extra boost so he, like his fellow winners, took on some financial stocks, and that helped push him to the top.

Now his biggest dilemma is trying to figure out which of his family he will take on the $14,000 luxury train trip that he won.

"I am married and have two kids," he says. "So I need to figure out who I am going to take."

Pajak, McAuliffe and Kim are all pressing their luck again and have entered Wall Street Survivor's current contest, which runs through August 29th. But none of them think they will win two times in a row.

Pajak has bought a lot of the financial stocks again, but so far that isn't really panning out for him, he says. "I am still hoping they will recover," he says.

His advice to other novice survivors, however, is to find something they like and stick with it. "If you have a strong feeling about something and you want to make a big impact, just buy a lot of related stocks and the chances are they will all move together," he says.

Kim also advises fellow survivors to follow their gut, but he believes a more risky approach is the way to go.

"In a fantasy contest you have to do the opposite of what you would do in real life," he says. "In real investing, you want to be diversified. But in a fantasy contest, if you are diversified you will miss the upswings. So you have to chase the hot stocks."


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Mark Berger