Hone your stock picking skills by paper trading

— -- Q: Is there a more entertaining and engaging way to "paper trade" stocks other than using pencil and paper?

A. If you're interested in investing, but have never bought a stock in your life, perhaps you've been told to "paper trade" first.

Paper trading is creating a make-believe portfolio and tracking it as if you're working with real money. Paper trading before plunging into stocks is like learning to surf on small waves or using training wheels before risking a big spill on a bike.

If you're like many beginning investors, though, paper trading just doesn't sound like all that much fun. For some people, writing down your buys and sells, or using a spreadsheet to record them, just doesn't feel that real. Also, I've noticed investors behave differently knowing they're not using real money. Beginning investors might be more daring using pretend money than they would with the real thing.

One option is to set up a free stock or mutual fund portfolio at USATODAY.com. You can enter "trades" and the portfolio tool with track your gains and losses.

And there's another option. Some online brokers are starting to let investors open paper trading accounts with fake money and start "trading." This is a great approach because by using a real trading system, the investor gets experience entering trades and gets a better simulation of investing. The system's whistles and bells will also expose investors to real temptations to buy and sell stocks too much.

And there's another benefit to online paper trading. You're only given a set amount of cash, which might force you to be more disciplined, even though it isn't real money. The system will also track your performance, so you get an accurate assessment of how you're doing. And finally, the system takes commissions and fees into account, forcing you to consider all the costs of your trading.