How to Track Hypothetical Stock Portfolios


Hypothetical stock portfolios are sometimes called practice portfolios or stock watch lists. Investors use them primarily to track a particular security or market's performance before investing cash. Strategies for tracking a hypothetical portfolio's performance are similar to the strategies investors use when tracking the performance of a funded portfolio. Investors have several options for tracking hypothetical portfolios. Some methods are as simple as making a list or spreadsheet of performance measurements for various stocks, while other methods are more sophisticated and use software to monitor the portfolio's performance.

Things You'll Need

  • List of investments
  • Performance measurements
  • Tracking method

Tracking a Hypothetical Portfolio

  • Identify the types of stocks and industries in which you want to invest. List them in a spreadsheet or word processor along with the performance benchmarks you plan to follow. A stock's daily price and how it has changed over the previous year are strong indicators of a stock's performance, according to Morning Star. Monitor each security's volume and dividend payouts as well.

  • Create several portfolios. Hypothetical portfolios don't cost money, so consider using portfolios that each monitor a different industry or that each serve a unique purpose. For example, one portfolio could track risky energy stocks, while the other could represent established companies that do not pose much risk to your money.

  • Consider using web-based market-monitoring services. Morning Star and Google Finance, for example, both offer free tools for creating and monitoring hypothetical portfolios. Services such as these take a lot of paperwork out of monitoring a portfolio's performance, and they also can generate customized charts and graphs.

  • Compare your portfolios to each other regularly, as well as to other major market indices such as the S&P 500. Day-to-day comparison and comparison at regular time intervals allow investors to account for the various reactions of potential investments to market shifts and other potential sources of volatility.

  • Record each stock's performance each trading day. Computer software or web-based tracking applications can record performance measures automatically. As the data accrues, determine which performance indicators, such as dividends, price stability or earnings-per-share, are important for you as you monitor the performance of individual stocks in the portfolio. Drop under-performing stocks, and readjust your portfolios as necessary to stay on track in meeting your goals.

  • Analyze the data consistently and regularly. Look for patterns in your portfolios and their performance relative to market fluctuation and industry-specific conditions. Changes in a stock's price, or in the overall value of a portfolio, is not the only way to gauge its performance. Often, a stock's trading volume and whether its company pays dividends indicate the investment's profitability and solvency.

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