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Lesson 3. How Much Do You Have to Invest? > Paper Investing - Pg. 17

How Much Do You Have to Invest? 17 The last reason for determining your expenses is simply good financial management, which includes getting rid of debt and acquiring sufficient savings to deal with any emergency. Good financial man- agement is the basis for effective stock investing. You need to be able to effectively manage your daily finances before venturing into the more complicated world of investment. Paper Investing Having confronted your fears and determined how much you have available to invest, you are almost ready to begin your career as an investor. However, since money is involved, it's not a bad idea to first try a dry run and apply the information you learn here to a fictitious portfolio of stocks. This process, better known as paper investing, is a particularly good method for getting started in investing. Through paper investing, you as a potential investor can in absolute safety apply your new knowledge to real-life scenarios, later discovering whether your decisions were correct. Use the knowledge you gain in this book to decide upon your standards for selecting an investment strategy, choosing stocks, and achieving a portfolio mix. Write these particulars down; then pick investments or stocks that meet all, or at least most of, your stated criteria. Monitor these invest- ments over a period of time (a couple of weeks or months) to see if your initial decision remains a good one. Amassing a fictitious portfolio, or paper investing, based on information you have learned is a good idea for new investors. Analyze your portfolio's performance to determine how good your initial investment decision was. You can begin your paper investing now, and increase your selections as you continue to learn new and relevant information throughout the book. Paper investing will make you more comfortable with Tip