It probably isn’t a coincidence that CNBC is launching its “Million Dollar Portfolio Challenge” just as fantasy football season is in full swing because there are real parallels between the two.  Fantasy football is a pastime enjoyed by millions of Americans.  However no one who runs a fantasy football team seriously thinks of it as a stepping stone to become a NFL general manager.

Unfortunately some novice traders might think this contest is stepping stone to a trading career.  In general we have been skeptical about paper trading.  There can be benefits to paper trading for novice investors.  Paper trading can help accelerate the learning process when it comes to the mechanics of trading.  You can also see how paper trading could help when it comes to trying out new trading systems or strategies.

However a trading contest like turns upside down the way traders should think about risk and return.  Check out the tag line from the contest:  “No Risk. All Reward. Grand Prize $1 Million.”  Every great trader I have read about takes the complete opposite position:  risk first, reward second.  Fantasy trading is therefore unlikely to help you when it comes to putting real money on the line.

The bottom line is that traders trade.  No matter how small the notional amounts involved there is no substitute for putting real money on the line.  If you want to play the CNBC Million Dollar Portfolio Challenge, good luck.  You might even win the million bucks or some of the other cool prizes.  However don’t think that fantasy trading is anything like real trading.

P.S. All you really need to know is that FXCM ($FXCM) is the sponsor of the CNBC Million Dollar Portfolio Challenge.  See Josh Brown’s earlier take on the retail forex business.

More Posts This Week

This content, which contains security-related opinions and/or information, is provided for informational purposes only and should not be relied upon in any manner as professional advice, or an endorsement of any practices, products or services. There can be no guarantees or assurances that the views expressed here will be applicable for any particular facts or circumstances, and should not be relied upon in any manner. You should consult your own advisers as to legal, business, tax, and other related matters concerning any investment.

The commentary in this “post” (including any related blog, podcasts, videos, and social media) reflects the personal opinions, viewpoints, and analyses of the Ritholtz Wealth Management employees providing such comments, and should not be regarded the views of Ritholtz Wealth Management LLC. or its respective affiliates or as a description of advisory services provided by Ritholtz Wealth Management or performance returns of any Ritholtz Wealth Management Investments client.

References to any securities or digital assets, or performance data, are for illustrative purposes only and do not constitute an investment recommendation or offer to provide investment advisory services. Charts and graphs provided within are for informational purposes solely and should not be relied upon when making any investment decision. Past performance is not indicative of future results. The content speaks only as of the date indicated. Any projections, estimates, forecasts, targets, prospects, and/or opinions expressed in these materials are subject to change without notice and may differ or be contrary to opinions expressed by others.

Please see disclosures here.

Please see the Terms & Conditions page for a full disclaimer.