The Time I Fought the Wall Street Journal

It was about how to teach about investing

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I once got in a spat with a Wall Street Journal columnist via email and in the august pages of the Journal itself. The reporter, Jason Zweig, had written an op-ed bashing online stock market games that teach students how to invest. Part of my job is training teachers on how to use such games.

Here’s part of what Mr. Zweig wrote:

“Every year, more than a million students across the U.S. learn about investing through stock-picking games... Proponents say these games are exciting and inspire an interest in investing. We could make drivers’ education exciting, too, by teaching kids to run red lights and crash into brick walls. I suppose you could even argue that might make the survivors better drivers. Of course, that isn’t how we teach teenagers to drive. Yet when it comes to investing and ‘financial literacy,’ millions of teenagers learn what it’s like to take wild risks, using play money—often amplified with more fantasy money that they borrow—to fire off a barrage of fast trades in turbulent assets.”

It’s an overwrought metaphor, but maybe he has a point. Good investing is about picking diverse assets and making money slowly. Doesn’t a stock market competition that is played in just one semester teach the opposite?

I don’t think so. There’s no evidence that these classroom games transform students into little prodigal finance bros who lose all their money in risky investments. Besides, “learning by doing” teaches bigger lessons. I said as much in a letter to the Journal, which they printed to be read by millions of real finance bros. Here it is:

“In ‘Learning the Wrong Investing Lessons,’ Jason Zweig worries that K-12 students are taught bad investing habits by stock-picking games, in which the goal is to make the most money over several months. This confuses what motivates the game with what students learn.

These simulations help students learn what a company is, what a stock is, how shareholders own companies, how markets work, how stock prices respond to real-world events, what companies do with profits, why investing entails risk, how to assess risk, how to evaluate a company’s fundamentals and more. In short, seeing from the perspective of an investor or producer, rather than a rule follower or consumer. Even the charge that the games are too short ignores that the alternative is to use even shorter lesson plans.

Mr. Zweig likens stock-picking simulations to teaching driver’s education students to drive into brick walls. A better analogy is how driving students zigzag around orange cones in parking lots. Zigzagging is a terrible driving strategy, but it is essential practice for learning how to operate a car.”

A simulation is a great way for kids to get the basic intuition of what it even means to invest in a market. I’m more concerned that they never invest than that they do it inefficiently.

I recently spoke with a dad at my kids’ school who has a great practice for teaching his upper-elementary-age daughter about investing. He bought her two investments with a small amount of money: a single stock in a company she knows (say, Toyota), and an index fund in a 529 college savings account. It’s easy to understand the changing value of an individual stock over time–the price follows the company’s success. Then she can see how the price changes compared to the price of the index fund. An index fund is less easy to understand – it’s basically a basket of stocks that is designed to mimic the whole stock market. An index fund is exactly what people should be investing in over the long term, since it spreads the risk around.

This dad’s plan also helps the child understand her 529 college savings account, which helps her think about her future education.

If you are an adult who doesn’t invest, think about starting. Here are five steps to get started:

• Spend less than you earn. This point summarizes all of financial education.

• Open an online investing account with a reputable company, or even your bank. (You’ll pay higher fees at your bank, but the important thing is to get started.)

• Link your new investing account to your bank account, as you would for bills you pay

• Choose an index fund in which to invest. Options will be limited, which is good

• Automatically deduct a small amount of money from your bank account to your investing account each month. Like all good habits, it’s not the amount that matters at first; it’s the consistency.

  • Disclaimer: I am a teacher, not a certified financial planner. Take this as education, not financial advice.

Mr. Zweig and I had a spirited exchange over email. He was generous with his time and his acerbic opinions. He never accepted my belief that kids benefit from experimenting in a real-time market. (You be the judge!) But whatever the teaching method is, kids should experience the economy from the side they’re not used to: the side of the producer, investor, worker, or entrepreneur.