This is not investing. In fact, having an investing mindset is not likely to get me very far in the contest. This is the mindset in which I set up my first contest portfolio. At this point that portfolio is barely breaking even.
To do well in a game like this I must have a short-term, maybe even day-trading mindset. As much as this is against my grain, I still think it is fun to play games like the CNBC Million Dollar Portfolio Contest and to try and win!
I am NOT a day-trading expert! But I will share two strategies I am using at this point to try and get an edge in the contest.
Trading Strategy 1
My first trading strategy is to use leveraged ETFs. In my third portfolio I have selected the following four leveraged ETFs. The point is to take as much risk as I can so I put 25% in each ETF.
This worked great on Tuesday as the market was up. Then on Wednesday the market went back down and the leverage worked against me.
I have a full-time day job, so trading is not something I can spend time on. This is the problem with trading. You have to watch your holdings and time the market closely. Get in as or before it heads up and get back out before it goes down.
This could be even more powerful if CNBC allowed the short versions of these same ETFs. Then you could jump from the long to the short or vice-versa when the market shifts. But, CNBC DOES NOT ALLOW SHORTING!
Trading Strategy 2
My second trading strategy is to look for stocks that will be reporting earnings in the near future and try and pick the ones that will have a positive upswing. Now this is close to looking into a crystal ball to predict the future.
Here is an article that lists when many S&P 500 companies will report their earning: DIARY-S&P 500 EARNINGS MONTH AHEAD. This could be a place to start looking for ideas. (UPDATE: 11/4/11, the following site has more earning data: Yahoo US Earnings Calendar.)
The way I am doing this is looking for companies in areas that I personally have some understanding. Then I may have a little better educated guess.
This strategy is explained further in a 2008 article on the Motley Fool, How to Win CNBC’s Million-Dollar Portfolio Challenge.
Again, this is not investing. This is taking risk as much risk as you can, with the hope that your BET pays off. If you want to simulate investing check out my inMessment Game.