Stock Market Games Encourage Poor Behavior

by | May 11, 2015 | Investor Behavior, News

Happy Stock Market Games, and may the odds be ever in your favor!

If you took an investing class in high school or college, you likely played some variation of a stock market game. You know, that game where teams try to obtain the best investment returns over a semester, month, or set period of time. While these games are fun (and quite similar to fantasy sports), the type of investor behavior they encourage is terrifying.

Jason Zweig of The Wall Street Journal recently described the goal of the annual Capitol Hill Challenge stock market game, writing:

“You need to understand what many of these young portfolio managers were trying to do: to beat the market over a 14-week period by taking as much risk as possible.”

4,400 groups of students from all over the United States participated in the Capitol Hill Challenge this year. The game’s sponsor, Sifma, states their goal is to teach students, “the importance of long-term saving and investing”. However, the type of behavior they’re actually endorsing is more or less the exact opposite of that. Some of the strategies used by past winners include taking massive margin loans to invest in heavily leveraged funds. To be clear, the students’ trades are done in paper accounts and no money is actually lost or gained. Do they understand that it’s just a game or are they left with a distorted perception of investing?

I get it, the stock market game is a fun way to pique youth interest in an area they would normally want nothing to do with. At what cost are we obtaining their interest though? You can tell students that the incredibly risky investment strategies used to win stock market contests don’t work well over time, but will they listen? Or will they get caught up in the rush of making a few successful stock picks and believe that’s how investing works? I know that most people my age are far more interested in picking hot stocks than investing in a diversified portfolio of no-load mutual funds or ETFs. Are stock market games promoting this gambler’s mentality?

The speculative behavior learned from stock market games is probably more harmful than helpful when it comes to educating kids about investing for the long term. Sound investment strategies may be boring to teach, but they also have infinitely more real-life value.


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