Stock Market Game with my HS daughter

[hnd]

So the time has come as it did with my oldest daughter that my 15 yr old has 2 months to beat the rest of her classmates in the stockmarket picking game!

They have 5 days to choose their investments and then there is roughly 2 months of observing. they can buy stocks, etfs, and mutual funds

We spent about an hour going through her chances of succeeding by trying to find stocks (they have to make at least 4 purchases), we talked about index funds kind of but ultimately it was about diversification.

with 10k funny money we purchased VTI, ITOT, and SCHB (because we have to make at least 4 purchases) We bought VXUS and then she used the last $1000 and bought Apollo Global Management because she think Qdoba is the greatest restaurant in the world.

we made these purchases this morning and subsequently the market dropped a percent so its pretty hilarious.

She did tell me that I was right in that telling everyone that you too also own that stock is driving her classmates nuts.

[nedsaid]

These stock market games are fun, I remember in High School we took a field trip to a local university where we participated in such an event.

My concern with these games is that since nothing is at stake, nothing is really learned. I learned a lot about business, the markets, and the economy from owning Stocks and from owning investments in general. When you have money on the line, incentive is there to learn. For me, what I learned was almost like having earned a second Bachelors' Degree in Business. I am not exaggerating.

Why not open a small brokerage account for your daughter, buy a few investments in her name and let her watch how they do. I suppose when she turns 18, she can do what she wants with it. But it is a valuable learning experience. Doesn't have to be a lot of money but the gift of knowledge is the best gift you can give.

[JoeRetire]

We bought VXUS and then she used the last $1000 and bought Apollo Global Management because she think Qdoba is the greatest restaurant in the world.

I'm not sure these games send the right message, but they are fun.

Reminds me of a class I took while pursuing my MBA. Each team had to devise a product line based on "market conditions" determined by the computer. Each week, we presented a recap of our actions and an explanation of why we took those actions to the entire class. Then the computer cranked out a set of weekly changes to the market. Lather, rinse, repeat.

My partner and I won, and so got an A. But realistically, we did almost nothing and just got lucky. Most weeks we presented some BS like "Our analysis concluded that market changes were insufficient to react with product line changes this week." Other teams seemed to over-react every week. Fun, but meaningless.

[prd1982]

Since the goal is to be #1, where being #2 is losing, i think you picked wrong. I would have suggested a random small company & hope for a major increase. Alternatively, a short term bond fund (if allowed) & hope to win because the market falls a lot.

As others have previously said this game is dangerous to the winner.

[FireProof]

If the goal is to win, you have to be very anti-Boglehead. In 2 months, a high-variance strategy (either short or long, but 50% ain't bad) is sure to beat a cautious average. Probably 100% SQQQ or TQQQ (3x leveraged Nasdaq, short and long) and call it a day

[er999]

If she wants to win she should pick something highly speculative. Index funds are the way to go for decades but not for 2 months.

I’d say the contest incentives the wrong thing though, not long term investing but more short term trading.

You could also open a real account since there are no commissions anymore so it’s affordable to buy a single stock. That’s what I did with my two kids age 10 and 12 (TD ameritrade but others have free kid accounts, I bought them a single share of total world, VTI, and VXUS and plan to check quarterly with them and they can’t sell until 18. They can use their own money to buy other stuff and sell anytime — the youngest spends his money on toys, the oldest has bought 1 share of Delta and several shares of Rivian.

[hnd]

yeah its really hard/silly to try and teach a child anything in 2 months. and I don't think this will make life changing formulations in her head but I believe we had a good time thinking about it, and we still made a pick that she thought would work. But we also talked about how winning is subjective. one of her friends has been pouring over this all 5 days. outside of the time we spent together learning, it was a pretty easy process. and in the end it was her decision what she did.

I did think about the ultimate bet and shorting the entire market somehow with 3x leverage.

[arcticpineapplecorp.]

you should have her play the following game trying to beat the market:
Prudential's Outsmart the Market

it teaches a valuable lesson at the end. if she learns it, her stock picking days will be over.

one of her friends has been pouring over this all 5 days.

sounds like this friend has the making to be a fund manager. that doesn't mean the friend will have any talent at picking stocks, but 80% of the fund managers don't either (they lose to the market each year):

https://www.spglobal.com/spdji/en/resea ... hts/spiva/

if you show her that, she'll learn that just because you're paid big bucks doesn't mean you're any better of a stock picker.

if her teacher doesn't teach the class these lessons, shame on that teacher. But these lessons that will last a lifetime will have come from you.

[rob]

I really wish they would not do this stuff... and I'm more sad that teachers honestly think it's good for the kids and it's actual "education" I have enough trouble trying to talk one of my kids off the robbinhood shorting BBY or whatever it is today ledge....

[livesoft]

My kids did this, but it could also be a great lesson if the teacher 'creates' a mutual fund of all the picks. Also a great lesson to see how many picks lose money. That is, put the emphasis not on the winners, but elsewhere. Anyways, are schools supposed to be teaching gambling?

[secondopinion]

you should have her play the following game trying to beat the market:
Prudential's Outsmart the Market

it teaches a valuable lesson at the end. if she learns it, her stock picking days will be over.

It concludes hardly anything because there is no information to make any sound decision. If anyone is learning not to picks stocks out of it, they should not be stock picking because they have been deceived. If anyone thinks that can with that highly limited information be able to beat the market, they should not be stock picking because there is not enough information and they are just being lucky/cocky. That leaves the three groups of people who know that this is garbage to consider their investing approach in real life: those who do not want to worry about the details and buy the market, those who consider the details and buy what matches their needs, and those who do tread their own way through speculation.

one of her friends has been pouring over this all 5 days.

sounds like this friend has the making to be a fund manager. that doesn't mean the friend will have any talent at picking stocks, but 80% of the fund managers don't either (they lose to the market each year):

https://www.spglobal.com/spdji/en/resea ... hts/spiva/

if you show her that, she'll learn that just because you're paid big bucks doesn't mean you're any better of a stock picker.

if her teacher doesn't teach the class these lessons, shame on that teacher. But these lessons that will last a lifetime will have come from you.

Sadly, the teacher is likely not going to be able to discuss the convexity of stock picking in any manner that would be both unbiased and understood.

I do not think we will agree on the assessment on these games; I try to play them in the optimal manner. The only lesson to be learned is to optimize the strategy in the context of the game; anything else leads to suboptimal play. Attempting to teach retirement investing by playing such games is a pointless endeavor.

[bberris]

The stock market game is to investing education as Russian Roulette is to firearm safety training.

[secondopinion]

My kids did this, but it could also be a great lesson if the teacher 'creates' a mutual fund of all the picks. Also a great lesson to see how many picks lose money. That is, put the emphasis not on the winners, but elsewhere. Anyways, are schools supposed to be teaching gambling?

Probability needs to be taught. Once that is taught in great detail, then they can consider stock market games.

Stock picking is not gambling if one does not treat it as such. After all, the composite of the market is profitable -- not a loss. Sadly, very few understand the difference and equate owning the market as owning the casino. No, the analogy is flawed.

I been on this board for a little more than two years; I see a lot of misunderstandings.

[secondopinion]

The stock market game is to investing education as Russian Roulette is to firearm safety training.

Umm, no. One is a harmless game that might hurt retirements a bit if learning does not continue; the other is almost always fatal for somebody.

[Doom&Gloom]

If the goal is to win, you have to be very anti-Boglehead. In 2 months, a high-variance strategy (either short or long, but 50% ain't bad) is sure to beat a cautious average. Probably 100% SQQQ or TQQQ (3x leveraged Nasdaq, short and long) and call it a day

+1

Seems weird to try to teach kids something that you would prefer that they not do in real life.

[Logan Roy]

I'd probably go with:

BABA
IEV
MCHI (iShares China)
TLT

But .. 2 months is trading, and the secret to trading is changing your mind as soon as the facts say otherwise.

[windaar]

I did this in High School in a math class. Kids picked stocks with funny names or of brands they personally liked. After a month, the "winner" got a 2-liter botle of Pepsi. Of course the winner won by luck alone, and it all seemed to us like picking numbers on a roulette wheel. I really learned nothing from the game. Many years later as a new employee I went to a conference which included a session on personal finance. In that hour I learned about mutual and index funds, employee retirement plans and Roths, the difference between stocks and bonds, compound interest, periodic investing, and tax advantages of investing. That's when I started investing in earnest, discovering Jack Bogle's philosophy in the next couple of years of reading and research. I wish they'd teach THAT in High School!

[gougou]

She should pick one penny stock and put 100% of the play money in it. Go big or go home.

[Kookaburra]

I wish high school wouldn’t do this sort of game. It’s at best not educational, and at worst hazardous.

Two outcomes:

1. Your stock pick goes up significantly in the 2 months. “Look, I have skill!” Sets them on the wrong path (individual stock picking) with the wrong mindset.

2. Your stock pick goes down in the 2 months. “Stocks are risky and I don’t want to lose money”. So then they avoid the stock market altogether.

[secondopinion]

I wish high school wouldn’t do this sort of game. It’s at best not educational, and at worst hazardous.

Two outcomes:

1. Your stock pick goes up significantly in the 2 months. “Look, I have skill!” Sets them on the wrong path (individual stock picking) with the wrong mindset.

2. Your stock pick goes down in the 2 months. “Stocks are risky and I don’t want to lose money”. So then they avoid the stock market altogether.

Or this:

3. They start down the path of taking investing seriously once they have the money to do so. They open an account, pick 30 or so stocks carefully by looking at the filings and metrics, wait patiently for the stocks to make money, continue to learn more about the market, learn a few ways not to do things (like listening to people as to selection), try different speculation strategies, realizing that ETFs exist to do a lot of the work, and so on.

Seriously, not everyone who does this is destined to failure. Quite the contrary, I think it made me think very carefully. I will probably never pay for an active fund manager.

[Hyperchicken]

Are you allowed to use options?

[Blister]

The best lesson in doing this game would be to pit everyone against a random selection of stocks. (Monkey with a dart board) Hopefully this would show them that short term changes are meaningless. Bringing home the fact that an index fund would beat the vast majority of stock pickers in the long run. In the short term luck is more of a factor than security analysis. Of course it would always depend on what 2 months the game was played.
Investing is a marathon and not a sprint. IMHO

[bberris]

No, the random basket (lets call it an index) will lose to someone who gets lucky, as long as the class is big enough. The lesson learned is that gambling pays off. Might as well hold a lottery.

[Kookaburra]

I wish high school wouldn’t do this sort of game. It’s at best not educational, and at worst hazardous.

Two outcomes:

1. Your stock pick goes up significantly in the 2 months. “Look, I have skill!” Sets them on the wrong path (individual stock picking) with the wrong mindset.

2. Your stock pick goes down in the 2 months. “Stocks are risky and I don’t want to lose money”. So then they avoid the stock market altogether.

Or this:

3. They start down the path of taking investing seriously once they have the money to do so. They open an account, pick 30 or so stocks carefully by looking at the filings and metrics, wait patiently for the stocks to make money, continue to learn more about the market, learn a few ways not to do things (like listening to people as to selection), try different speculation strategies, realizing that ETFs exist to do a lot of the work, and so on.

Seriously, not everyone who does this is destined to failure. Quite the contrary, I think it made me think very carefully. I will probably never pay for an active fund manager.

I think most Bogleheads, myself included, don’t advocate paying for an active fund manager.

[Simpleteacher]

New to BH but a retired financial planner and current tax volunteer. I also used to teach the stock market game to high schoolers as part of volunteer program.

I agree kids enjoy the game but I think we are teaching the wrong principals of investing. The winner is the one who makes the most money over a short period of time. I tried to change the game rules with the schools teacher but they wouldn't change.

Here is my view on how the game should be changed. The winner should be who losses the most money the fastest. Teach the kids about the highest risk investments to avoid while using play money. They could invest in Penny Stocks, commodities, Crypto, meme stocks, international currencies metals, high risk option strategies, leveraged ETF's, low volume specialized ETF's, day trading and whatever other high risk investments someone could recommend to learn from. It would teach them more about volatility and risk tolerance and retain the experience of a game.

Another alternative if they had two classes is to have one do it the traditional way and the other do it the way I suggest.

Thoughts!!!

[arcticpineapplecorp.]

Or this:

3. They start down the path of taking investing seriously once they have the money to do so. They open an account, pick 30 or so stocks carefully by looking at the filings and metrics, wait patiently for the stocks to make money, continue to learn more about the market, learn a few ways not to do things (like listening to people as to selection), try different speculation strategies, realizing that ETFs exist to do a lot of the work, and so on.

Seriously, not everyone who does this is destined to failure. Quite the contrary, I think it made me think very carefully. I will probably never pay for an active fund manager.

1. but picking stocks yourself, you're acting like an active manager.

2. 55% of active managers (read: you too, now that you're picking stocks and acting like your own active manger) underperform the market each and every year. That's called doing worse than a coin toss. Why would you believe you can do better then the pros? And the longer you try the more likely your underperformance will be. 85%-90% will underperform over 3-15 years. This is not up for debate. This is fact: https://www.spglobal.com/spdji/en/resea ... hts/spiva/

we can (should) teach this. There's no reason people have to make mistakes that have already been made by others. It's possible to learn the lessons of those who came before us.

3. I'd test them on The Arithmetic of Active management. Make sure they understand why active investing on average has to be the loser's game relative to passive investing.

4. "wait patiently for the stocks to make money" except when they don't?

only 4% of the stocks since 1926 have created the value of the market.

The [Bessembinder] study includes all of the 26,168 firms with publicly-traded U.S. common stock since 1926. Despite the fact that investments in the majority (57.8%) of stocks led to reduced rather than increased shareholder wealth, U.S. stock market investments on net increased shareholder wealth by $47.4 trillion between 1926 and 2019.

source: https://papers.ssrn.com/sol3/papers.cfm ... id=3537838

stock selection is truly searching for a needle in the haystack. Why would we want to teach our children to gamble with their future like that when the return of the market, the simpler path to wealth is there for their taking?

[Finridge]

Fidelity now has a new "Youth Account" option for teens aged 13 to 17, with no account fees or minimum balance requirements. We just opened one. I think this is a great way to get kids started with investing with real money, even if it's just a few bucks.

And I agree that playing stock picking games is dangerous and counterproductive. Have them use the account to get started in Boglehead-style investing where they buy and hold a three fund portfolio.

https://www.fidelity.com/go/youth-account/overview

[HKexpat]

These stock market competitions are organized by SIFMA, a lobbying group for banks and brokerages. Incentives are what they are: they benefit from active trading more than passive index investors. As others have said, if you go with an index fund, you will do very well in the long run, but you will not be the top performer in the short run.

[secondopinion]

Or this:

3. They start down the path of taking investing seriously once they have the money to do so. They open an account, pick 30 or so stocks carefully by looking at the filings and metrics, wait patiently for the stocks to make money, continue to learn more about the market, learn a few ways not to do things (like listening to people as to selection), try different speculation strategies, realizing that ETFs exist to do a lot of the work, and so on.

Seriously, not everyone who does this is destined to failure. Quite the contrary, I think it made me think very carefully. I will probably never pay for an active fund manager.

1. but picking stocks yourself, you're acting like an active manager.

2. 55% of active managers (read: you too, now that you're picking stocks and acting like your own active manger) underperform the market each and every year. That's called doing worse than a coin toss. Why would you believe you can do better then the pros? And the longer you try the more likely your underperformance will be. 85%-90% will underperform over 3-15 years. This is not up for debate. This is fact: https://www.spglobal.com/spdji/en/resea ... hts/spiva/

we can (should) teach this. There's no reason people have to make mistakes that have already been made by others. It's possible to learn the lessons of those who came before us.

3. I'd test them on The Arithmetic of Active management. Make sure they understand why active investing on average has to be the loser's game relative to passive investing.

4. "wait patiently for the stocks to make money" except when they don't?

only 4% of the stocks since 1926 have created the value of the market.

The [Bessembinder] study includes all of the 26,168 firms with publicly-traded U.S. common stock since 1926. Despite the fact that investments in the majority (57.8%) of stocks led to reduced rather than increased shareholder wealth, U.S. stock market investments on net increased shareholder wealth by $47.4 trillion between 1926 and 2019.

source: https://papers.ssrn.com/sol3/papers.cfm ... id=3537838

stock selection is truly searching for a needle in the haystack. Why would we want to teach our children to gamble with their future like that when the return of the market, the simpler path to wealth is there for their taking?

1. That is the point. If I am doing the active management, then I do not need someone else to do it.

2. That statistic reflects convexity in their positions with respect to the market. Some desire the convexity, others for concavity; depending on the selection, the probability of outperformance given a year will be certainly greater than 45%.

Given my performance in fixed income over at least a decade, I have little reason to assume that passively managing it will do better (the ten year on BND is very poor). I can exploit some things that no fund manager can do because they fall outside of the scope of investment. No illiquidity tricks on my NAV; I already have factored such in.

3. Saves most people from failure.

4. I understand, but I just have not had a rotten experience as a whole. If it makes you feel better, I do not pick stocks these days for the most part; not because of what I learned here or that I was losing, but because I do not have the time.

[Logan Roy]

Or this:

3. They start down the path of taking investing seriously once they have the money to do so. They open an account, pick 30 or so stocks carefully by looking at the filings and metrics, wait patiently for the stocks to make money, continue to learn more about the market, learn a few ways not to do things (like listening to people as to selection), try different speculation strategies, realizing that ETFs exist to do a lot of the work, and so on.

Seriously, not everyone who does this is destined to failure. Quite the contrary, I think it made me think very carefully. I will probably never pay for an active fund manager.

1. but picking stocks yourself, you're acting like an active manager.

2. 55% of active managers (read: you too, now that you're picking stocks and acting like your own active manger) underperform the market each and every year. That's called doing worse than a coin toss. Why would you believe you can do better then the pros? And the longer you try the more likely your underperformance will be. 85%-90% will underperform over 3-15 years. This is not up for debate. This is fact: https://www.spglobal.com/spdji/en/resea ... hts/spiva/

we can (should) teach this. There's no reason people have to make mistakes that have already been made by others. It's possible to learn the lessons of those who came before us.

3. I'd test them on The Arithmetic of Active management. Make sure they understand why active investing on average has to be the loser's game relative to passive investing.

4. "wait patiently for the stocks to make money" except when they don't?

only 4% of the stocks since 1926 have created the value of the market.

The [Bessembinder] study includes all of the 26,168 firms with publicly-traded U.S. common stock since 1926. Despite the fact that investments in the majority (57.8%) of stocks led to reduced rather than increased shareholder wealth, U.S. stock market investments on net increased shareholder wealth by $47.4 trillion between 1926 and 2019.

source: https://papers.ssrn.com/sol3/papers.cfm ... id=3537838

stock selection is truly searching for a needle in the haystack. Why would we want to teach our children to gamble with their future like that when the return of the market, the simpler path to wealth is there for their taking?

I think one has to fully accept those arguments. But I suppose to play devil's advocate – and justify why I hold some stocks, ETFs and active funds – very few investor's real aim is beating the market. Because no one knows how the market's going to do. I think what most investors really want is a guarantee.

When I started investing, the standard advice was to buy a FTSE 100 tracker. It wasn't easy to trade international stocks, and UK stocks were more efficient (tax) and less volatile. But had I done that, I'd have gone 20+ years without making a positive real return. What I'm really looking for is a reliable return. And that, and income, is what large parts of the industry cater to. Plus, the easiest way to beat the market's always been the market + leverage, which doesn't seem to interest many investors.

So I like to collect 'safe' stocks. I don't mind holding JNJ, ULVR, AAPL. I like to overweight Consumer Staples and Healthcare. I ditched Treasuries by 2014, because there didn't look to be any value in them. I like more diversification than 60:40. Regular rebalancing. I like the reliably of TIPS, but only when they're offering reasonable yields. I think of it in terms of: how many paths have I got to a reasonable outcome? 'The market' is always the wild card, for me. As an international investor, it's perhaps easier to be a pessimist.

[JoeRetire]

3. They start down the path of taking investing seriously once they have the money to do so. They open an account, pick 30 or so stocks carefully by looking at the filings and metrics, wait patiently for the stocks to make money, continue to learn more about the market, learn a few ways not to do things (like listening to people as to selection), try different speculation strategies, realizing that ETFs exist to do a lot of the work, and so on...

... and lose to the kid who picks a stock with a symbol that closely resembles their dog's name. They spent a lot of time and get a B- ,while the student who spent no time and picked WOOF gets an A.

(finished that for you)

Both students learn something about playing school games.

[nydoc]

Probably wise to stay out of this game.

[secondopinion]

3. They start down the path of taking investing seriously once they have the money to do so. They open an account, pick 30 or so stocks carefully by looking at the filings and metrics, wait patiently for the stocks to make money, continue to learn more about the market, learn a few ways not to do things (like listening to people as to selection), try different speculation strategies, realizing that ETFs exist to do a lot of the work, and so on...

... and lose to the kid who picks a stock with a symbol that closely resembles their dog's name. They spent a lot of time and get a B- ,while the student who spent no time and picked WOOF gets an A.

(finished that for you)

I did this in college; I got extra credit for both outperformance and rationale for selection. The teacher graded by rationale and extra credit was performance; the teacher wanted real portfolios. Semester, Fall 2008.

Most of what I said referred to after college. And no, you did not do me a favor by auto-completing the story. True, someone did do that maneuver; but I doubt they got graded well for rationale.

[arcticpineapplecorp.]

When I started investing, the standard advice was to buy a FTSE 100 tracker. It wasn't easy to trade international stocks, and UK stocks were more efficient (tax) and less volatile. But had I done that, I'd have gone 20+ years without making a positive real return. What I'm really looking for is a reliable return. And that, and income, is what large parts of the industry cater to. Plus, the easiest way to beat the market's always been the market + leverage, which doesn't seem to interest many investors.

if you didn't have a positive return (by owning the market) for 20+ years, how would leverage have helped in that scenario?

[secondopinion]

Or this:

3. They start down the path of taking investing seriously once they have the money to do so. They open an account, pick 30 or so stocks carefully by looking at the filings and metrics, wait patiently for the stocks to make money, continue to learn more about the market, learn a few ways not to do things (like listening to people as to selection), try different speculation strategies, realizing that ETFs exist to do a lot of the work, and so on.

Seriously, not everyone who does this is destined to failure. Quite the contrary, I think it made me think very carefully. I will probably never pay for an active fund manager.

1. but picking stocks yourself, you're acting like an active manager.

2. 55% of active managers (read: you too, now that you're picking stocks and acting like your own active manger) underperform the market each and every year. That's called doing worse than a coin toss. Why would you believe you can do better then the pros? And the longer you try the more likely your underperformance will be. 85%-90% will underperform over 3-15 years. This is not up for debate. This is fact: https://www.spglobal.com/spdji/en/resea ... hts/spiva/

we can (should) teach this. There's no reason people have to make mistakes that have already been made by others. It's possible to learn the lessons of those who came before us.

3. I'd test them on The Arithmetic of Active management. Make sure they understand why active investing on average has to be the loser's game relative to passive investing.

4. "wait patiently for the stocks to make money" except when they don't?

only 4% of the stocks since 1926 have created the value of the market.

The [Bessembinder] study includes all of the 26,168 firms with publicly-traded U.S. common stock since 1926. Despite the fact that investments in the majority (57.8%) of stocks led to reduced rather than increased shareholder wealth, U.S. stock market investments on net increased shareholder wealth by $47.4 trillion between 1926 and 2019.

source: https://papers.ssrn.com/sol3/papers.cfm ... id=3537838

stock selection is truly searching for a needle in the haystack. Why would we want to teach our children to gamble with their future like that when the return of the market, the simpler path to wealth is there for their taking?

I think one has to fully accept those arguments. But I suppose to play devil's advocate – and justify why I hold some stocks, ETFs and active funds – very few investor's real aim is beating the market. Because no one knows how the market's going to do. I think what most investors really want is a guarantee.

When I started investing, the standard advice was to buy a FTSE 100 tracker. It wasn't easy to trade international stocks, and UK stocks were more efficient (tax) and less volatile. But had I done that, I'd have gone 20+ years without making a positive real return. What I'm really looking for is a reliable return. And that, and income, is what large parts of the industry cater to. Plus, the easiest way to beat the market's always been the market + leverage, which doesn't seem to interest many investors.

So I like to collect 'safe' stocks. I don't mind holding JNJ, ULVR, AAPL. I like to overweight Consumer Staples and Healthcare. I ditched Treasuries by 2014, because there didn't look to be any value in them. I like more diversification than 60:40. Regular rebalancing. I like the reliably of TIPS, but only when they're offering reasonable yields. I think of it in terms of: how many paths have I got to a reasonable outcome? 'The market' is always the wild card, for me. As an international investor, it's perhaps easier to be a pessimist.

Bingo; now I understand your posts. I am here to say, maybe you have not convinced me on quite a few points of philosophy; but certainly you have given me quite a brain-racking experience to try addressing your posts. At the end, it did convince me that my precious metal can stay in my hiding place instead of being sold.

I agree that meeting objectives is what the portfolio is supposed to do. That is the root reason I actively invest: because the market does not know/care about my objectives. If some of the people on this board understood that clearly, they would stop insisting that my way is wrong.

[secondopinion]

When I started investing, the standard advice was to buy a FTSE 100 tracker. It wasn't easy to trade international stocks, and UK stocks were more efficient (tax) and less volatile. But had I done that, I'd have gone 20+ years without making a positive real return. What I'm really looking for is a reliable return. And that, and income, is what large parts of the industry cater to. Plus, the easiest way to beat the market's always been the market + leverage, which doesn't seem to interest many investors.

if you didn't have a positive return (by owning the market) for 20+ years, how would leverage have helped in that scenario?

Logan Roy said "positive real return", not "positive nominal return". If borrowing was really cheap, then it is still possible to achieve the objective as presented.

[arcticpineapplecorp.]

When I started investing, the standard advice was to buy a FTSE 100 tracker. It wasn't easy to trade international stocks, and UK stocks were more efficient (tax) and less volatile. But had I done that, I'd have gone 20+ years without making a positive real return. What I'm really looking for is a reliable return. And that, and income, is what large parts of the industry cater to. Plus, the easiest way to beat the market's always been the market + leverage, which doesn't seem to interest many investors.

if you didn't have a positive return (by owning the market) for 20+ years, how would leverage have helped in that scenario?

Logan Roy said "positive real return", not "positive nominal return". If borrowing was really cheap, then it is still possible to achieve the objective as presented.

thanks. missed that. got it.

[Logan Roy]

When I started investing, the standard advice was to buy a FTSE 100 tracker. It wasn't easy to trade international stocks, and UK stocks were more efficient (tax) and less volatile. But had I done that, I'd have gone 20+ years without making a positive real return. What I'm really looking for is a reliable return. And that, and income, is what large parts of the industry cater to. Plus, the easiest way to beat the market's always been the market + leverage, which doesn't seem to interest many investors.

if you didn't have a positive return (by owning the market) for 20+ years, how would leverage have helped in that scenario?

Good point. In nominal terms, you'd have probably made a slightly higher return, and technically beaten the market. But obviously that might not always be the case (I'm quoting Bogle on the point though).

[Logan Roy]

Or this:

3. They start down the path of taking investing seriously once they have the money to do so. They open an account, pick 30 or so stocks carefully by looking at the filings and metrics, wait patiently for the stocks to make money, continue to learn more about the market, learn a few ways not to do things (like listening to people as to selection), try different speculation strategies, realizing that ETFs exist to do a lot of the work, and so on.

Seriously, not everyone who does this is destined to failure. Quite the contrary, I think it made me think very carefully. I will probably never pay for an active fund manager.

1. but picking stocks yourself, you're acting like an active manager.

2. 55% of active managers (read: you too, now that you're picking stocks and acting like your own active manger) underperform the market each and every year. That's called doing worse than a coin toss. Why would you believe you can do better then the pros? And the longer you try the more likely your underperformance will be. 85%-90% will underperform over 3-15 years. This is not up for debate. This is fact: https://www.spglobal.com/spdji/en/resea ... hts/spiva/

we can (should) teach this. There's no reason people have to make mistakes that have already been made by others. It's possible to learn the lessons of those who came before us.

3. I'd test them on The Arithmetic of Active management. Make sure they understand why active investing on average has to be the loser's game relative to passive investing.

4. "wait patiently for the stocks to make money" except when they don't?

only 4% of the stocks since 1926 have created the value of the market.

The [Bessembinder] study includes all of the 26,168 firms with publicly-traded U.S. common stock since 1926. Despite the fact that investments in the majority (57.8%) of stocks led to reduced rather than increased shareholder wealth, U.S. stock market investments on net increased shareholder wealth by $47.4 trillion between 1926 and 2019.

source: https://papers.ssrn.com/sol3/papers.cfm ... id=3537838

stock selection is truly searching for a needle in the haystack. Why would we want to teach our children to gamble with their future like that when the return of the market, the simpler path to wealth is there for their taking?

I think one has to fully accept those arguments. But I suppose to play devil's advocate – and justify why I hold some stocks, ETFs and active funds – very few investor's real aim is beating the market. Because no one knows how the market's going to do. I think what most investors really want is a guarantee.

When I started investing, the standard advice was to buy a FTSE 100 tracker. It wasn't easy to trade international stocks, and UK stocks were more efficient (tax) and less volatile. But had I done that, I'd have gone 20+ years without making a positive real return. What I'm really looking for is a reliable return. And that, and income, is what large parts of the industry cater to. Plus, the easiest way to beat the market's always been the market + leverage, which doesn't seem to interest many investors.

So I like to collect 'safe' stocks. I don't mind holding JNJ, ULVR, AAPL. I like to overweight Consumer Staples and Healthcare. I ditched Treasuries by 2014, because there didn't look to be any value in them. I like more diversification than 60:40. Regular rebalancing. I like the reliably of TIPS, but only when they're offering reasonable yields. I think of it in terms of: how many paths have I got to a reasonable outcome? 'The market' is always the wild card, for me. As an international investor, it's perhaps easier to be a pessimist.

Bingo; now I understand your posts. I am here to say, maybe you have not convinced me on quite a few points of philosophy; but certainly you have given me quite a brain-racking experience to try addressing your posts. At the end, it did convince me that my precious metal can stay in my hiding place instead of being sold.

I agree that meeting objectives is what the portfolio is supposed to do. That is the root reason I actively invest: because the market does not know/care about my objectives. If some of the people on this board understood that clearly, they would stop insisting that my way is wrong.

Oh I'm glad to hear it. And likewise, and I think the best way for me to work out what I think is to put it out there and see whether it makes more or less sense to me in the process. I think it's how Bridgewater like to test ideas.

But yes – I think the Harry Browne portfolio had a big influence on me, in that this concept of consistency is something that can probably be engineered to an extent, and that markets aren't totally abstract and divorced from economies. And I think asset allocation is far from being 'solved' by any existing investing paradigm, which keeps it interesting.

[dertere]

When I played the stock market game as a student, the "winning" top 10% consisted entirely of the folks who realized that the online platform we were using had a delay versus real time which you could front run. Taught me the very valuable lesson on the value of insider information, and the futility in trying to actively trade against someone with that knowledge.

[secondopinion]

When I played the stock market game as a student, the "winning" top 10% consisted entirely of the folks who realized that the online platform we were using had a delay versus real time which you could front run. Taught me the very valuable lesson on the value of insider information, and the futility in trying to actively trade against someone with that knowledge.

My class was required to give a write up on every action done to the portfolio (which was graded); any students who would have tried that would certainly fail because they had no good reason.

[Fallible]

WSJ columnist Jason Zweig wrote the following on "What Teenagers Really Learn From Stock Market Games":

In the long run, investors who diversify broadly, avoid unnecessary risk and rarely trade are almost certain to do well. In these stock-market competitions, teenagers who behave like that are almost certain to lose.

IMO, this is what teens should and can learn before they play games that can teach them the wrong lessons - lessons they will then have to unlearn when they invest with their own real money. And UNlearning can be especially difficult because these games rely heavily for their popularity on the excitement of winning, or the hope of winning. In other words, they rely greatly on young emotions in the short term, rather than emotional control (discipline, patience) that will be required for the long term. Is it really "play" money if the wrong lessons are being learned?

https://www.wsj.com/articles/what-teena ... 1648220833

[Onlineid3089]

I don't remember for sure, but I want to say that way back when we did this in school the winner was someone who picked a penny stock that happened to go up a cent and therefore double or something dumb like that.

I don't think anybody learned anything useful by doing it. I can't remember what I picked, why I picked it, or how I did.

[secondopinion]

I don't remember for sure, but I want to say that way back when we did this in school the winner was someone who picked a penny stock that happened to go up a cent and therefore double or something dumb like that.

I don't think anybody learned anything useful by doing it. I can't remember what I picked, why I picked it, or how I did.

My class required a written rationale for each stock (and a written reason for any updates we wanted to do) and we were required to pick at least 5 stocks. The grade was on the rationale, not performance. I got 100% plus extra credit for outperformance (during Fall 2008). An "A" was not getting first place; it was thinking like a real investor.

[arcticpineapplecorp.]

perhaps high schools should instead do real financial education instead of playing games (and gambling games at best, more on that in a moment).

teachers can use Next Gen Personal Financie

Teachers can teach kids about:
Teenages making wagers
online gambling among youth
Problem Gambling Is on the Rise Among Young Men

maybe teachers could guide kids to the Financial Truth Tellers

that sounds like a much better use of kids time (and limited resources) than gambling by picking stocks for two months.

[AllMostThere]

....She did tell me that I was right in that telling everyone that you too also own that stock is driving her classmates nuts.....

This is hilarious. If she learns anything from this experience it is that diversification is great benefit and that investment in individual stocks is heartbeat away from gambling (IMHO). Do not assume that the "class" will actually teach her anything unless the teacher does an in-depth analysis of the student portfolios upon conclusion to see which was best, least risky, etc. The desired learning outcome needed to be communicated up front, but doubtful it was. It was probably presented as a fun game for the students so don't expect much (I hope I'm wrong with that assumption). She will probably learn more from you by reviewing her portfolio and discussing the BH way of life on a regular basis. Upon completion of the game, you may want to get her involved with Fidelity and open a youth account with her. Either go to the office with her or have her open the account on-line with you looking over her shoulder. Fidelity Youth Account is awesome. Please be sure to offer an update to the forum upon completion of the class activity.

[hnd]

So we homeschool our children yet each week they get together with a group of homeschool peers and have a "teacher/facilitator/parent" guide them in some way shape or form. I spoke with this person and she was like your daughter was the only one who bought a mutual fund or ETF. she was like "I had to go look it up to see what it was. I asked my husband and he explained it to me and he laughed and was like thats genius! "

she's like meanwhile her son has spent a good number of hours buying and selling and getting frustrated at how hard it is (each transaction has a $10 commission charge). we talked about why I helped her do it this way instead of letting her go nuts, and the challenge was to just let it run by itself

I got further clarification that they ARE able to buy and sell throughout the entire 3 (i thought it was 2) month period. She said my daughter is the only one who bought ETF/Mutual funds. a few haven't done anything and said they'd rather just have it in savings, some have bought a little, but not their whole pot of money, and a good number are trying to day trade.

She also asked that after this experiment was over if I wanted to come and kind of talk about the results and try discussing it with high school children. I said I would enjoy that.

In the interest of keeping it simple, i'm going to give them some quick history, quickly talk about ways to invest, and give them some statistics about how difficult it can be but also give them some encouragement that when its comes time, to invest early and often.

[Fallible]

So we homeschool our children yet each week they get together with a group of homeschool peers and have a "teacher/facilitator/parent" guide them in some way shape or form. I spoke with this person and she was like your daughter was the only one who bought a mutual fund or ETF. she was like "I had to go look it up to see what it was.
...
She also asked that after this experiment was over if I wanted to come and kind of talk about the results and try discussing it with high school children. I said I would enjoy that.

In the interest of keeping it simple, i'm going to give them some quick history, quickly talk about ways to invest, and give them some statistics about how difficult it can be but also give them some encouragement that when its comes time, to invest early and often.

To learn about all areas of investing that all investors, especially new ones, should know up front, I would suggest showing them William Bernstein's classic book, The Four Pillars of Investing, beginning with theory, history, psychology, and business. After reading this - and it is a relatively easy read and a book to refer to for many years - kids (and their teachers?) will realize how much there is to learn about investing beyond the act of buying a stock, fund, etc.. Best of all, it shows the importance of overall planning, or as the Bogleheads' philosophy states, of having a workable plan. In fact, they might also be interested in seeing all of the principles that make up the Bogleheads' investment philosophy:

https://www.bogleheads.org/wiki/Boglehe ... philosophy

[tibbitts]

I don't remember for sure, but I want to say that way back when we did this in school the winner was someone who picked a penny stock that happened to go up a cent and therefore double or something dumb like that.

I don't think anybody learned anything useful by doing it. I can't remember what I picked, why I picked it, or how I did.

My class required a written rationale for each stock (and a written reason for any updates we wanted to do) and we were required to pick at least 5 stocks. The grade was on the rationale, not performance. I got 100% plus extra credit for outperformance (during Fall 2008). An "A" was not getting first place; it was thinking like a real investor.

How can you get 100% plus extra credit for outperformance when the grade was not based on performance? So performance didn't matter, except it actually did?

[secondopinion]

I don't remember for sure, but I want to say that way back when we did this in school the winner was someone who picked a penny stock that happened to go up a cent and therefore double or something dumb like that.

I don't think anybody learned anything useful by doing it. I can't remember what I picked, why I picked it, or how I did.

My class required a written rationale for each stock (and a written reason for any updates we wanted to do) and we were required to pick at least 5 stocks. The grade was on the rationale, not performance. I got 100% plus extra credit for outperformance (during Fall 2008). An "A" was not getting first place; it was thinking like a real investor.

How can you get 100% plus extra credit for outperformance when the grade was not based on performance? So performance didn't matter, except it actually did?

The extra credit was based on outperforming, but there was a minimum grade that had to be met before you qualify for the extra credit.