Simulated investing platforms are increasingly popular with young people, offering a risk-free way to place trades before using real money. But critics warn that paper trading can encourage speculative behavior that feels closer to gambling than long-term investing, The Wall Street Journal reported late Saturday.
One college student in New York recalls winning a high-school investing contest after making an all-in bet on GameStop (GME) with fake money, an experience he now views as a lesson in risk rather than strategy. He later shifted to a more conservative real-world portfolio.
Platforms such as Webull report rapid growth in Gen Z users experimenting with simulated portfolios. Nearly two-thirds of paper trades on Webull involve options, highlighting the appeal of high-risk strategies over slower, buy-and-hold approaches.
Brokerages argue that paper trading helps users learn market mechanics and test strategies without financial consequences. Companies that offer both simulated and real trading say users who practice first are more likely to become active investors later.
Some traders credit paper trading with helping them refine techniques before committing real capital, while others note that emotional pressure makes live trading far more difficult. Educators, however, are divided. Some see simulators as useful training tools; others say they confuse beginners and create unrealistic expectations about stock picking.
Because paper trading removes real losses, students who score big gains may overestimate their ability, teachers warn. The concern is that simulated success can mask the discipline and patience required for long-term investing.
As young investors eventually transition to real portfolios, often favoring diversified funds or blue-chip stocks like Alphabet (GOOG) (GOOGL), many discover that lessons learned with fake money don’t always translate cleanly to markets where losses are real.
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