This year's contest, which began in April, pits an expert fund manager against a novice group of pupils and an amateur investment club in a year-long race to see who can make the most profits. Each team started with a virtual £5,000 to invest in a fantasy portfolio. After a year, the team with the most profits will pocket a prize of £2,000.
James Bevan, who is a fund manager at Abbey, and the Fairer Shares Investment Club both bravely courted aggressive shares right from the start and have suffered the most damage to their fickle fortunes.
Bevan is nursing the worst loss, trailing in last place with a loss of 11 per cent. Not far behind is the club, with a loss of 9 per cent.
The only team to survive the downturn have been the 15-year-old pupils from Moat Community College in Leicester. They have no stock market experience, but are leading the contest with an overall loss of 4.5 per cent. They are the only team beating the market, with the FTSE All Share Index down 5.7 per cent since the contest began.
Like many novice investors, the pupils prefer to invest in popular, high-street companies, hoping that this will translate into solid investments.
So far, the strategy has paid off. Shares in retail giants such as Tesco and Marks & Spencer are weathering market movements better than firms in more volatile sectors.
But it is Boots, one of Britain's largest pharmacy chains, that is one of the team's best performers to date. The share shot up nearly 7 per cent after investors tucked into the firm ahead of its upcoming merger with Alliance UniChem, one of Europe's largest pharmacies.
"To be honest, it doesn't surprise me that the students are in the lead," says Paul Dolman-Darrall, the chairman of the Fairer Shares Club. Their 8.8 per cent drop lost them the top spot to the student team.
The pupils' safer stocks were the ingredients for a defensive portfolio that has steered them well through the recent turmoil. "The companies the students chose were never going to move much - either up or down," Dolman-Darrall argues. "In a rising market, their selection would have been less successful, but, when the market turned, they were better protected than either the fund manager or ourselves."
Claire Jackson, the student's business studies teacher, thinks there is more than just sheer luck behind her team's performance. The pupils stick to a strict stop-loss policy and always sell out quickly when their shares start losing money. By ditching losing shares, they staved off major losses before it was too late and used the proceeds to buy shares that were on the rise.
The more experienced competitors have let their bullish enthusiasm cloud their judgement. The fund manager and the investment club have watched their fortunes dwindle as they held on to losing shares that they thought were too cheap to go down further.
For the investment club, it is the equipment rental firm Vp that has sent profits tumbling. The share has dropped 24 per cent since they bought it last month.
The club is not too worried, however. They have seen the market drop before and they are less inclined to sell off solid companies just because of market jitters. "Vp has just reported excellent results: profits were up and the company has delivered on all its targets," adds Dolman-Darrall. "If the company keeps giving us good news, then we're not too worried about the falling price."
James Bevan, who is the chief investment officer at Abbey, agrees. He is not overly worried by his 11 per cent fall and says he is "fascinated" by the market sell-off. "Both good investments and poor investments have all been caught up in the storm," he says.
For Bevan, it is BAE Systems, the defence contractor, that has proved the albatross of his portfolio, tanking 18 per cent since purchase. The fall comes on the back of news that BAE is selling its 20 per cent stake in EADS, the manufacturer of Airbus, which has been struggling to make its new A380 aircraft. Some insiders worry that the sale will be at a reduced price.
Last month, Bevan sagely predicted that the market was due a correction, but he didn't think it would roll around this quickly.
"It seems there are two factors behind why nervousness persists in the marketplace," Bevan says. "First, investors wanting to take money in 'risky' shares off the table; and secondly, the concerns that global growth will be disappointing and global inflation is accelerating."
Yet the fund expert remains confident that the market can recover and his share picks will come through before the contest ends. "I see no good reason to be overly cautious right now and I predict that overall growth this year will come in at around the same level as last year," he says.
"Panicking out of stocks because the share prices fall is not clever, even if it is understandable. My strategy is to remain focused on fundamentals and sit the storm out."
Expert advice. But it's the pupils who have stemmed their losses and taken the lead, proving again that novice investors can play the markets and beat the suits when they put their minds to it.
The Share Challenge is sponsored by Abbey Sharedealing, the low-cost broker. For more information or to set up your own account, visit www.abbeysharedealing.com or call 0800 389 2324.
Looking for the latest stock market tips? For up-to-the-minute market information on all your favourite shares, log on to www.digitallook.com, which provides the data for the Share Challenge, along with www.bullbearings.co.uk.
This month's winner of the £100 cash prize in our Save & Spend Reader Investment Challenge is Barbara Ann Watson of Buckinghamshire. Her virtual portfolio made a gain of 6 per cent in four weeks through two shares, Euromoney Institutional Investor and Workspace Group, which rose 14 per cent in the past month.
Why not join in and compete against the Share Challenge teams and other readers with your own virtual share portfolio? Save & Spend, Abbey Sharedealing, the virtual trading website Bullbearings and the online investment portal Digital Look are offering eight more rounds of the Reader Challenge with £100 cash prizes for readers who can make the most profits in four weeks. It's free to enter and played with "virtual" cash.
To take part in the third round, register at www.bullbearings.co.uk/independent before 30 June and choose the five shares you think will increase over the next four weeks. We'll announce the winner on 5 August and launch the next round with another £100 cash prize.
Check in for price updates and to see if your stocks are winning at www.bullbearings.co.uk/independent.Reuse content