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Stock Market Simulators: Learn How Virtual Trading Works

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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Flight simulators, business simulators, skydiving simulators — they all help you get a feel for what the real thing is like when it’s time to act. Stock market simulators do the same, allowing investors to get in the game with risk-free virtual trading. Here’s how these simulators work, where you can find them and how they just might improve your trading.

What is a stock market simulator?

A stock market simulator or a stock trading simulator offers traders a chance to invest virtually in real stocks on the exchange. Usually, traders can buy and sell whichever securities they’d like, and they often compete against other traders to earn the most profit within a specified time. Sometimes, the site offering the virtual trading stakes traders with an initial virtual bankroll as they hit the market.

Stock market simulators often are used as a contest or game among friends. In this scenario, the stock picking is often low-key, and fun is just as much a part of the mix as winning. You might leave the contest with a hot stock idea, but a good time is the goal for many players.

But in other scenarios, traders use stock market simulators for much more serious ends, putting them to work before they put their real money out in the market. They test their investing ideas — whether a strategy can work and what it might return in profit. Traders also use these simulators to test their emotional responses to earning and losing money. Temperament is one of the most important success factor for a trader, and simulators may help them calibrate their emotions.

Where to find stock market simulators

To get started, you’ll need to find a website, app or service that offers a simulator. Brokers’ sites tend to offer simulators that are better suited to testing ideas alone, while financial sites offer a more social, gamelike atmosphere for their simulators.

On financial sites, you’ll likely be asked to create an account before you can begin, but from there, it’s usually free. Brokers may require you to open an account before accessing their simulators, which they also call a “demo” or “paper trading.”

Financial sites

You can find a variety of different simulators on the following sites:

  • Investopedia: After registering for the Investopedia Stock Simulator, you’ll be able to join games created by Investopedia or its members, or you can create one yourself. Each game offers customized settings that will allow players to trade on margin, short sell and trade options if desired. When you’re ready to trade, you enter the order almost as you would at a real broker.

Investopedia allows you to set up watchlists and has a pair of stock screens that allow you to sift through the market. A portfolio page tracks your holdings and tallies up your assets. It even ranks your performance against other players in your game. If you’re new to stocks, it offers helpful tutorials to help you navigate the process.

  • Virtual Stock Exchange: This game is offered by MarketWatch, and after an obligatory registration, you can be off and running in one of more than 40,000 games or design your own. By default, you can buy virtually any ticker on an American exchange, or you can narrow down the choices by index, exchange or security type (stock, mutual fund or exchange-traded fund). You’ll set how much money players start with and whether they’ll be able to trade on margin and short sell. From there, you’ll set the game length and be on your way.

Virtual Stock Exchange is a well-produced simulator, and from your player page, you can pull up stocks by typing in the ticker. A pop-up will show you the stock’s chart, and you can move quickly to the stock’s full page on MarketWatch. If you’re ready to trade, hit the trade button, and you can efficiently enter your order with a slider, no typing needed. Your player page also details your portfolio and a watchlist for later research.

  • Wealthbase: This new kid on the street is a slickly designed and smooth-as-butter stock picker that gets you and your trader friends in the game quickly. A clean interface allows you to navigate intuitively, and you can pick from all stocks and ETFs trading on U.S. exchanges. A social feed (a la Facebook) publishes the actions of gamers, while daily progress updates keep you engaged and informed. A ticker search brings up charts and a news feed, while a portfolio page tracks picks. This is social media meets simulator.

Broker sites

Some broker sites also offer simulators that make it appear as if you’re really in the market — with no one by your side — and that’s the experience you want to mimic in order to test your temperament.

  • TD Ameritrade: This online broker calls its stock trading simulator paperMoney, and it’s part of the company’s thinkorswim trading platform. You’ll need to register with the broker (or have an account there) before you can download the program. After installing it, your screen is filled with the trading platform, and you will start with $200,000 in virtual money.

It can be overwhelming at first. There are just so many options, and you have the full suite of tools here. It’s best suited for professionals who use these tools, follow the streaming news, and monitor markets and stocks simultaneously. A few clicks will get you to any stock’s page, with detailed financials and ratings. From there, feel free to test out any strategy you want.

  • TradeStation: This online broker also offers a demo account called the TradeStation Simulator after you’ve registered. Like TD Ameritrade, TradeStation offers a fully featured virtual account. You can start with any amount of cash you’d like and then trade just as you would in real life. You’ll have a complete view of your day’s activity, including profit and loss. You also can automate trading strategies and test them with live data to see if they work.

Virtual trading accounts at brokers are as much about familiarizing yourself with the trading platform as they are about learning to trade.

So what are the upsides and downsides of virtual trading?

Virtual trading can be a great way to get a feel for the market, especially if you’re just starting out. There’s a lot to learn, so it’s best to learn as much as you can inside the safe confines of a stock market simulator, where you can’t lose any money. Simulators can be an excellent way to help you practice before you go out to buy your first stock.

Simulators also allow you to try out different strategies without fear of failure. Did you sell that stock accidentally when you meant to buy? Did the stock you purchased just tank? No problem!

While simulators can show you how to trade in a real environment, there are limits to their ability to help you calibrate your reactions. When real money is on the line, your emotions and actions change. You’ll always react differently to gains and losses when it’s real money. So when you come out of the simulator cool as a cucumber, don’t expect that calm to last forever. Like the rest of life, there are just some things practice will never fully prepare you for.

Two more downsides to virtual trading: commissions and taxes. Virtual trading allows you to trade without feeling the pinch of trading commissions, so it’s easy to get the feel that they’re inconsequential, but overtrading can really run up your expenses. Similarly, virtual trading allows you to avoid another real-world expense: taxes on your gains. Inside a simulator, it can be easy to forget there are actual negative financial consequences to trading stocks.

Bottom line

Stock market simulators are a great way to become familiar with how the market works, pick up a few stock ideas and have a good time. They’re also useful for learning the ins and outs of a broker’s trading platform before putting up real money. But whether you’re ready to invest real money or virtual, be sure to read MagnifyMoney’s guide on how to invest in stocks.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Investing

Review of Altfest Personal Wealth Management

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Altfest Personal Wealth Management is an investment management firm based in New York City. The firm typically only accepts clients with a minimum investment of $1 million. For these high net worth clients, Altfest Personal Wealth Management provides customized investment portfolios with comprehensive financial planning services. The firm has 16 employees who provide investment advisory services, and currently oversees $1.21 billion in assets under management (AUM).

All information included in this profile is accurate as of February 10th, 2020. For more information, please consult Altfest Personal Wealth Management’s website.

Assets under management: $1,210,000,000
Minimum investment: $1 million (waivable at the firm’s discretion for young professionals)
Fee structure: A percentage of AUM, ranging from 0.50% to 1.40%, depending on account size; hourly fees; fixed fees
Headquarters: 445 Park Avenue
Sixth Floor
New York, NY 10022
www.altfest.com
212-406-0850

Overview of Altfest Personal Wealth Management

Dr. Lewis Altfest launched Altfest Personal Wealth Management in 1983. He is still the majority owner of the firm and acts as CEO. He runs the organization along with his wife, Dr. Karen Altfest, the firm’s executive vice president, and their son, Andrew Altfest, the firm’s president. Both Lewis and Karen hold Ph.Ds; Lewis is an associate professor of finance at Pace University.

Including the Altfests, the firm has 37 total employees, 16 of whom provide investment advisory services. Altfest Personal Wealth Management specializes in creating customized, actively managed investment portfolios for high net worth clients. The firm and the Altfest family have won numerous awards for their performance, and both Lewis and Karen are regular contributors to financial news programs and publications.

What types of clients does Altfest Personal Wealth Management serve?

Altfest Personal Wealth Management primarily works with individual investors. A client usually needs a portfolio of at least $1 million to open an account with the firm — however, Altfest does make exceptions to this account minimum for “young professionals” who they believe will become high net worth clients in the future. The firm’s individual client base is currently split 40/60 between individuals and high net worth individuals, with the SEC defining high net worth individuals as those with at least $750,000 under management or a net worth of at least $1.5 million.

While the firm works with a diverse range of clients, it specializes in advising women, executives and healthcare professionals. In addition to individual investors, Altfest Personal Wealth Management also works with pension plans, profit-sharing plans, trusts, estates, corporations and other business entities.

Services offered by Altfest Personal Wealth Management

Altfest Personal Wealth Management specializes in investment management and financial planning. However, the firm’s investment management services are available to individuals and small businesses only; these services are not offered to investment companies, pooled investment vehicles, large businesses and institutional clients.

Most of the firm’s investment accounts are run on a discretionary basis, meaning that Altfest Personal Wealth Management advisors can make trades on behalf of the client. The firm does have a few nondiscretionary accounts, where the client must approve all trades themselves.

If a client only wants a few investment recommendations, rather than the management of their entire portfolio, the firm can provide this service as well.

Altfest Personal Wealth Management also offers comprehensive financial planning, as many of its advisors hold the certified financial planner (CFP) designation, a professional certification for financial planners. The firm’s financial planning services include the creation of a detailed financial plan outlining the necessary steps to achieve their goals and objectives. The plan can address specific areas, such as college savings, estate planning and debt management.

More specifically, Altfest’s services include:

  • Investment advisory services and portfolio management (mainly discretionary but some non-discretionary)
  • Financial planning
    • Retirement planning
    • Trust and estate planning
    • Charitable planning
    • Education planning
    • Tax planning
    • Cash flow forecasting
    • Budgeting and strategic planning
    • Long-term care planning
    • Debt management
    • Divorce planning
  • Insurance and risk management
  • Workshops and seminars
  • Newsletters and publications

How Altfest Personal Wealth Management invests your money

Altfest Personal Wealth Management builds unique, customized portfolios for each client based on their time horizon, risk tolerance, income level and long-term goals.

As part of this analysis, the firm follows a system called Total Portfolio Management. Rather than only looking at a client’s investment history, the firm also gets to know their entire financial plan, including income, debts, spending requirements and future earnings potential. The firm uses this information to finetune a portfolio comprised of stocks, bonds, mutual funds, ETFs and private funds.

Altfest Personal Wealth Management follows an active investment approach: this means the firm is regularly trading in an attempt to earn above-average portfolio returns.

Fees Altfest Personal Wealth Management charges for its services

For portfolio management services, Altfest Personal Wealth Management charges a fee based on a percentage of assets under management, with the rate ranging from 0.50% to 1.00%, depending on the size of the client’s portfolio. Altfest does not charge trading commissions or performance-based fees.

Portfolio Size Annual Asset-Based Fee
First $3 million* 1.00%
Between $3,000,001 and $6,000,000 0.75%
Over $6,000,000 0.50%
*If a portfolio falls below $2 million in value at the end of the quarter, the firm will assess an additional 0.10% fee on top of the asset-based fee listed above.

For “young professional” clients who don’t meet the firm’s portfolio minimums, Altfest charges the following fee schedule:

  • In the first year, the firm charges an annual fee of either 1.10% of assets under management or $2,500 whichever is greater.
  • After the first year, the firm charges 1.10% of the portfolio value or $1,500 per year whichever is greater.

This rate includes cash flow analysis, investment analysis, investment management and 401(k) recommendations. Clients who want additional financial planning services will be billed at a rate of $250 per hour.

If a client only wants standalone investment recommendations, Altfest Personal Wealth Management charges either an hourly fee ranging from $500 to $800 an hour, or a fixed fee of at least $3,500 for specific investment recommendation requests.

Finally, some of the investments included in Altfest’s portfolio recommendations may carry additional fees. Clients are responsible for covering these costs, though the money won’t go to Altfest Personal Wealth Management.

Altfest Personal Wealth Management’s highlights

  • Wide range of awards: Over the past few years, Altfest Personal Wealth Management has been recognized as a top investment advisor by publications including Barron’s, Forbes, Financial Times and Financial Advisor magazine.
  • Highly educated management team: The heads of the firm, Dr. Lewis Altfest and Dr. Karen Altfest, both hold Ph.Ds; Lewis is also an associate professor of finance at Pace University. In addition, many of the financial advisors at the firm hold the CFP designation.
  • Customized investment approach: Altfest Personal Wealth Management designs a customized portfolio for every client, tailored to their specific needs, and don’t lump people into one-size-fits-all funds as some firms may do.
  • Extensive financial planning in addition investing: Altfest Personal Wealth Management also specializes in financial planning. When the firm creates a portfolio recommendation, it goes over a client’s entire financial situation before designing the portfolio, not just their existing investments.
  • Specialty in advising women, executive and healthcare clients: The firm specializes in advising women, executives and professionals in healthcare. Additionally, Forbes named Dr. Karen Altfest one of the top women advisors in the country in 2017, 2018 and 2019.

Altfest Personal Wealth Management’s downsides

  • Above-average investment fees: Altfest Personal Wealth Management charges an annual 1.00% asset-based fee on the first $3 million in a client’s account (plus an additional 0.10% per quarter if their portfolio value falls below $2 million). In comparison, the median investment management fee charged by firms for accounts over $2 million is 0.75%, according to Kitces.
  • High minimum to open an account: It takes at least $1 million to open an account with Altfest Personal Wealth Management. While the firm does waive the minimum at its discretion for “young professionals,” the typical investor would need to be quite wealthy to make use of the firm’s services.
  • Only has one location in New York City: The only way to visit the Altfest Personal Wealth Management office in person is in New York City, the firm’s only location.

Altfest Personal Wealth Management disciplinary disclosures

Whenever an SEC-registered firm or its employees or affiliates face disciplinary action, including a criminal charge, a regulatory infraction or a civil lawsuit, the firm is required to report that incident in its Form ADV, paperwork filed with the SEC. Altfest Personal Wealth Management reports in its Form ADV that it has faced no such incidents over the past 10 years, indicating a clean disciplinary record.

Altfest Personal Wealth Management onboarding process

To start the onboarding process with Altfest Personal Wealth Management, you can request a free consultation with one of its advisors. You can contact the firm either by phone at 212-406-0850, by email at [email protected] or by filling out a form on the firm’s website. As part of the onboarding form, the firm asks you to share your story, which helps the firm start determining whether you are a good fit based on your income and profession.

If it seems like a good match, the firm’s advisors will then get to work designing your customized investment portfolio based on your goals, risk tolerance and overall financial situation. When you’re ready to launch, the firm’s advisors would then take care of opening your new accounts, transferring over your existing accounts, making the necessary investments and keeping up with the records for your portfolio.

The bottom line: Is Altfest Personal Wealth Management right for you?

If you’re a high net worth individual or a young professional who wants personalized investment recommendations combined with financial planning, Altfest Personal Wealth Management could be a good choice. This may be especially true if you are in one of the firm’s specialty client categories: women, executives and healthcare professionals. Since Altfest Personal Wealth Management only has one location in New York City, however, the firm might be a better choice if you live in the Northeast rather than other parts of the country.

On the other hand, Altfest Personal Wealth Management’s comprehensive services do not come cheap. The firm’s fees are higher than average, and you’d need at least $1 million to open an account (unless Altfest waives the minimum because you’re a young professional). If you want a simpler investment strategy or prefer to manage your portfolio more on your own, you could find less expensive advisors than Altfest Personal Wealth Management.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

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Investing

Your 401(k): Handling Interest Rate Ups and Downs

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

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With any change in the economy or your life situation, it is a good idea to review your investment portfolio, particularly your 401(k) plan, to make sure your investments are structured to meet your needs at retirement. This is especially true when interest rates are rising so you can take maximum advantage of those high rates. There’s also benefit to checking on your investments when rates are down; certain investments will actually be worth more and you can make a profit by selling or simply enjoy your higher-earning investments.

Interest rates rise and fall based on changes in the economy. The Federal Reserve (the Fed) may lower rates to support the economy when it’s going through a weaker patch and may choose to raise interest rates as the economy begins to gain strength.

Either way, there’s no need to panic. We’ll help you understand what happens to your 401(k) investments in either situation.

What to ask yourself when reviewing your 401(k)

A 401(k) is a savings vehicle that many companies make available to help their employees save for retirement. For tax year 2019, you have until April 15 to contribute up to $19,000 of your earnings into your 401(k) on a pretax basis, meaning anything you contribute is not taxed until you withdraw it, usually at retirement. For 2020, you can contribute up to $19,500.

Some companies match employee contributions up to a certain limit that varies by employer. These contributions are not taxable to you until you withdraw them. Companies offer employees a variety of 401(k) investment options. Some larger companies allow employees to choose from a dozen or more mutual funds, including various stock, bond and real estate funds.

While any time is a good time to review your 401(k) investments, a rise (or fall) in interest rates is a particularly good time to make certain your 401(k) investments meet your needs based on your age, years until retirement and risk tolerance, among other factors.

Virtually all 401(k) plans offer one or more fixed-income investment options. These typically include both government and corporate bonds of varying maturities. For example, a fund might offer a mutual fund that invests in short-term Treasury bills, one that invests in long-term Treasury bonds and one that invests in corporate bonds. Some companies might even offer a fund that invests in so-called junk bonds that pay a higher rate of interest in return for the risk of investing in low-quality bonds.

What to expect when rates rise

An increase in interest rates will eventually have an impact on the types of fixed-income funds in a 401(k). A fund that invests in short-term Treasury bills will react quickest to this change. When the bonds that the funds hold mature over the subsequent year, the fund manager will reinvest the proceeds in bonds that pay a higher rate of interest.

A corporate bond fund, on the other hand, includes bonds with varying maturities. It may take time for the fund to invest its assets in bonds that pay higher interest, as most fund managers spread their investments over maturities between one and 30 years so that at least some bonds are always maturing to potentially be reinvested at a higher rate.

A rise in interest rates also will affect the price of existing bonds in a portfolio. Say the corporate bond fund you own has an XYZ Company corporate bond that pays 4% interest. As market interest rates rise, the value of that bond will decline to a point where the current yield on that bond is closer to the market rate. Since most fund managers anticipate that interest rates will rise, they have structured their portfolios to minimize the impact that an increase will have on the fund’s value.

Let’s return to reviewing your 401(k) investments. When you started your job, you probably picked a mix of investments and haven’t made any changes. That’s fine if you started your job two years ago. But if you have been working for the same company for 10 years, a review is a good idea.

Let’s say that when you started working for the company at age 30, you were single and invested 90% of your 401(k) in stocks and just 10% in bonds. Now, fast-forward 10 years. You got married. And while retirement is still at least 25 years away, it is something you can begin to see on the horizon. It might be a good time to increase your fixed-income allocation to add greater stability to your 401(k) returns — especially if interest rates are rising.

What to expect when rates fall

It’s important to keep in mind that interest rates also can fall. The bad news is this typically happens when the economy isn’t doing so well. The good news is your higher-rate fixed-income investments will be worth more. You can choose to sell them and take the profit or hold them and enjoy earning a rate that’s higher than the one currently available.

Investing when interest rates are falling requires a different strategy. Young investors with many years until retirement who have the bulk of their 401(k) investments in stock should be able to ride out a period of low interest rates without significant impact.

Older investors who see retirement on the horizon or are already retired will find falling interest rates more problematic. Their investments may be concentrated in fixed-income vehicles, or they may be seeking solid long-term fixed-income investments to pay them the retirement income they need. Since nobody can predict how long rates will continue to fall, buying fixed-income investments with staggered maturities, sometimes called a bond ladder, is the best way to make sure you always have money available to take advantage of rising interest rates when they happen.

What’s ahead for 2020

The general expectation for 2020 is that market interest rates will continue to decline. The Federal Reserve has put the federal funds rate on an indefinite pause since its series of three rate cuts in the second half of 2019. In response, banks lowered their own rates and continue to do so overall.

If the Fed does make a change, it is largely expected to be another rate cut rather than a rate hike. This is thanks to outside risks to the economic outlook, namely weaker global growth, trade negotiations and the recent coronavirus outbreak. The Fed’s three rate cuts in 2019 were designed to support the U.S. economy in the face of these threats. If they continue to weigh on the economy, which is performing pretty well on its own, the Fed will be more likely to cut rates to continue that support.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.