I teach personal finance to high school kids and have likewise been wary of some of the stock picking games. They can send the message that stocks are risky and you have to know what you are doing to invest. I do play one game called build your Stax, which uses real historical data to simulate a 20 year time frame. The index fund wins 90% of the time. I like to teach that long term investing is very easy, anyone can do it, and it beats the professionals most of the time.
Yeah, Stax is a great game which I highly recommend. But I'm not sure that it's designed to teach more than just one thing: "choose the index fund." How do you teach the rest of the things that I list in the letter, which I think a stock simulation does?
I teach generally what stocks, bonds, and mutual funds are. The stock market the games probably do teach some other skills on analysis and risk assessment, but I come down on the belief that picking individual stocks is a fools game that involves more luck than skill. I make the analogy that individual stocks are like gambling at a casino. It can be fun and sometimes you win, but don't bet more than you can lose.
I agree with you I don't think it is encouraging kids to be risky investors, I do think it can send the message that investing takes special knowledge and skill and so they will just avoid it when they are adults.
I think presented correctly, the games could have value, but I think they are at cross purpose with some of the other lessons I am trying to teach.
Excellent points! Your take reflects an understanding of sound pedagogy. Lectures about how the stock market works aren’t anywhere near as powerful as participating in the Stock Market Game.
Sounds like a good thing to teach kids about the stock market in immersive fashion. My one concern is I heard that people’s investing risk aversion in their lives is deeply affected by their very first investing experience. I can attest to this: I put my first big pot of money in the stock market in April 2008. I’ve been risk averse ever since. If the kids have a bad (or amazing!) experience in that short, semester-long time frame, I wonder if that will unduly influence their attitudes for life.
Great point, Julian. We actually have some data on this from a study that I published in 2015. I compared student attitudes towards risk with the market gains or losses in the stock market game that year. Finding: "The difference between a 30% loss [in the market] versus a 4% gain corresponded with an 12% difference in students’ answering that they will be more careful with their money." So there was an association between stock performance and student added towards towards risk. But it seemed muted to me. Here's the link: http://www.cefe.illinois.edu/JCE/archives/2013_2014_vol_30/2013-2014_vol_30_pg30-44_Day.pdf
Oh, I should have said what the percentages were of students saying the game made them more conservative with their money. It was 67% in 2008, and 55% in 2012. I can't believe I didn't reference the paper in the blog post!
I teach personal finance to high school kids and have likewise been wary of some of the stock picking games. They can send the message that stocks are risky and you have to know what you are doing to invest. I do play one game called build your Stax, which uses real historical data to simulate a 20 year time frame. The index fund wins 90% of the time. I like to teach that long term investing is very easy, anyone can do it, and it beats the professionals most of the time.
Yeah, Stax is a great game which I highly recommend. But I'm not sure that it's designed to teach more than just one thing: "choose the index fund." How do you teach the rest of the things that I list in the letter, which I think a stock simulation does?
I teach generally what stocks, bonds, and mutual funds are. The stock market the games probably do teach some other skills on analysis and risk assessment, but I come down on the belief that picking individual stocks is a fools game that involves more luck than skill. I make the analogy that individual stocks are like gambling at a casino. It can be fun and sometimes you win, but don't bet more than you can lose.
I agree with you I don't think it is encouraging kids to be risky investors, I do think it can send the message that investing takes special knowledge and skill and so they will just avoid it when they are adults.
I think presented correctly, the games could have value, but I think they are at cross purpose with some of the other lessons I am trying to teach.
Appreciate that.
Today l'll be introducing my subscribers
to a huge,p.r.o.f.i.t.a.b.I.e l.n.v.e.s.t.m.e.n.t Chat my 𝘁𝗲𝗹𝗲𝗴𝗿𝗮𝗺 👇🏻
Daysteph
Excellent points! Your take reflects an understanding of sound pedagogy. Lectures about how the stock market works aren’t anywhere near as powerful as participating in the Stock Market Game.
Sounds like a good thing to teach kids about the stock market in immersive fashion. My one concern is I heard that people’s investing risk aversion in their lives is deeply affected by their very first investing experience. I can attest to this: I put my first big pot of money in the stock market in April 2008. I’ve been risk averse ever since. If the kids have a bad (or amazing!) experience in that short, semester-long time frame, I wonder if that will unduly influence their attitudes for life.
Great point, Julian. We actually have some data on this from a study that I published in 2015. I compared student attitudes towards risk with the market gains or losses in the stock market game that year. Finding: "The difference between a 30% loss [in the market] versus a 4% gain corresponded with an 12% difference in students’ answering that they will be more careful with their money." So there was an association between stock performance and student added towards towards risk. But it seemed muted to me. Here's the link: http://www.cefe.illinois.edu/JCE/archives/2013_2014_vol_30/2013-2014_vol_30_pg30-44_Day.pdf
Interesting! Thanks for the link. Always a danger to use oneself as a proof point.
Oh, I should have said what the percentages were of students saying the game made them more conservative with their money. It was 67% in 2008, and 55% in 2012. I can't believe I didn't reference the paper in the blog post!
Oops, that was 2007.