DC1 is in Gifted and Talented Pullout this year, and one of the things that they do is participate in a competition called the Stock Market Game.
As an economist and someone with a personal hobby interest in personal finance, the stock market game irritates me SO MUCH. The criteria for winning is to be the team that has made the most money picking hypothetical stocks after a set time period.
The way to win this game is to be in the extreme tail of the normal distribution. Of course, that’s also how to get the lowest score. Essentially, the game rewards risk-taking, punishes diversification and fails to punish losing gambles. Since it is a winner-take-all game, there’s no benefit to going for a middle-of-the-road strategy. You’re going to lose just as hard in the middle of the pack as you would taking enormous chances and being the lowest ranked team. So you might as well gamble and hope for that upside.
Of course, with real investing there are real losses to taking on risk and losing. This game equates being the second highest scoring team (or really, the fourth highest scoring team) with being the lowest scoring team. Anybody who aims for the more sure middle is going to lose because some other teams took risks.
Also, there’s a reason that real stock market investing is a long-term game, not a short-term one. Games that praise short-term gains and ignore the long-term may even discourage investing because they show the market to be much more volatile than it actually is over a long time horizon. Of course, that may be better than kids growing up to invest their retirement assets in the extremely risky portfolios that have the likeliest chance of winning this kind of game.
I’m not the first person to complain about this stupid school-sponsored game. Here’s confessions of a stock market game winner. Here’s someone at the WSJ complaining about how it teaches exactly the wrong lessons.
(And, just in case you’re a new reader: You should invest in low cost broad-based index funds for long-term investing.)
Have you ever played the stock market game?