Economy 4.0

Klaus Rules

David Brancaccio Feb 18, 2011

Along with 19,000 other people, Klaus Neukert of Munich entered a stock trading contest sponsored by the German Stock Exchange. A virtual, online stock portfolio, fake money, real securities prices. What could be done with 20,000 euros in just three months? Neukert turned this starter “cash” into 1.4 million fake euros. His grand prize is a very real Porsche 911 S Carrera, worth $144,000. Here is the Neukert approach:

1) Klaus started the contest with rapid-fire trades in the frenetic style of daytrading.

2) Klaus took into account the fact that each virtual transaction incurred a hefty service charge of 50 fake euros.

3) Klaus used derivatives to amplify his bets on the direction of the key German stock index, the DAX.

4) Klaus slowed the pace of his trading as his portfolio’s value climbed.

5) Klaus acknowledged that his biggest asset was the contest having a firm end date, so he didn’t keep on trading, which he believes would have led him to virtual ruin as his performance reverted to the mean.

6) Klaus knows what he is doing: he works for a big financial services company.

7) Klaus says he never would have traded as aggressively if it was his own, real money.

8) Klaus politely declined all requests by his pals for him to invest their money for real.

9) Klaus may sell the Porsche and put the money into real estate, a home he is building.

10) Klaus admits that he was lucky as heck.

Sponsoring this virtual portfolio contest is not the only way the German Stock Exchange is trying to promote and expand its business. Its newly-announced blockbuster merger with the New York Stock Exchange also comes to mind.

For more about Klaus and the German stock contest, listen to the Marketplace Money story, How to make $1.8 million in three easy months.

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