Mike Koza's 'Toddly Growth'? Mock mutual funds show amateurs' skills.

Buy low, sell high. Be patient, don't panic. Such advice sounds like it comes from mutual-fund managers stating the rules of investing. But it comes from virtual managers - people who put together winning mock funds at Marketocracy, a website that lets investors create portfolios and see how they match up to those of professionals.

During the second quarter, Marketocracy's Top 100 virtual funds had an average return of 35.4 percent, higher than the 30.5 percent return posted by the top 100 professionally managed funds, according to Morningstar, a Chicago firm that tracks the fund industry.

Marketocracy members - there are 35,000 of them - aren't doing virtual money managing for bragging rights alone. The Los Altos, Calif., company (www.marketocracy.com) says it plans to hire the best performers starting in 2003.

The thinking is that you don't have to be a professional to beat the market, says Ken Kam, who started Marketocracy in 2000 and is its chief executive.

"Having watched this group for a year, I am surprised that even in a bad market environment there are people who know how and are able to ferret out good investing opportunities," Mr. Kam says.

"There's probably some beginner's luck involved. It's not easy picking stocks," says Mike Koza, a civil engineer in Sacramento, Calif., and the quarter's top fund manager. "I kind of rode a good wave there. A lot of stocks were really cheap in March."

Mr. Koza's Toddly Growth Fund posted a return of 65.56 percent. Among the holdings of the fund, which concentrates on smaller-company stocks, are Actrade Financial Technologies Inc. and EarthShell Container Corp.

His advice: "Be patient. In early April, some of my holdings dropped by almost half. But I hung in there. Don't follow the market all the time. Don't panic."

Postal carrier Michael Kernan of Metairie, La., says he recommends that investors not get too attached to stocks. He learned that the hard way as a real-life investor in EMC Corp., a battered tech company.

"The best lesson I have learned ... is to cut your losses quickly. If a stock goes down 10 percent quickly, you have to sell it even if you love it, because it is probably going to go down more," says Mr. Kernan, who placed third. "You can recover from a 10 percent loss, but it is real hard to recover from a greater-than-50 percent loss."

Kernan's Pelican State Technology Fund held Nokia and Cabot Microelectronics.

Do your research, says Dudley Smith, a life-insurance agent in Riverside, Calif., and the quarter's fifth-best manager.

"I hear of a stock and I go, 'Oh, that sounds interesting,' and so then I start following it," Mr. Smith says. "I usually won't invest right away. I want to get acquainted with the stock. I look up the fundamentals and the officers in the company."

Smith's Dr. Dud's Mutual Fund focuses on technology stocks, although Smith confesses to barely being able to run his own computer. The fund's holdings include Emulex Corp. and Finisar Corp.

"The most important thing is to exit a position when you have a huge gain and not to be too greedy," says Jean-Hugo Drouillet's, a Philadelphia translator whose biotech fund placed eighth. "This is the hardest part, because you are always tempted to have more and more."

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