The venerable Stock Market Game run by the SIFMA Foundation has been around for 40 years. It serves 15,000 teachers and 600,000 students annually, and undeniably helps kids in grades 4-12 better understand investing and economics.
No other national financial literacy program has enjoyed such reach for such a long time. But disruption is in the air. A new financial literacy game built around the stock market aims to reach students with a more complete view of how investing works.
This month, the nonprofit NextGen Personal Finance will roll out STAX, an online investing simulation that young people can play alone or in a classroom setting. The game tries to simulate 20 years of investing in 20 minutes by asking students to invest a portion of their make-believe income each month, choosing between stocks, bonds, bank CDs, gold and other assets.
Returns are based on actual market results over a 35-year period. So, the same strategy employed time after time will yield different results. Playing alone, the goal is to save more than the computer, which is always fully invested in the S&P 500 index. Playing as part of a class, students compete with one another, and educators may hit a pause button to explore the virtues of things like stock index funds, 401(k) plans, and emergency funds.
I played alone several times and found the site difficult to navigate at first. I needed several tries to get the game started. Young people will probably take to it more readily. Once I had a grip on how the game works, I found input coming at me so fast I had little time to really think about my decisions.
No sooner did I realize that the market had risen and I might want to rebalance my portfolio than stock prices began to sink. I often also found I had a ton of new money to invest from ongoing income or some sort of bonus or windfall–and didn’t have time to think about where to put it. The computer beat me every time, mainly because it put every bit of excess cash in the stock market as soon as it got it and then held for the long term.
That, it turns out, is no accident. “The goal is frankly for students to be trying to figure out all of these asset classes and to finish 20 years with an overwhelming sense of decision fatigue,” NextGen founder Tim Ranzetta told me in an email. “They then have the aha moment of most times just dollar-cost averaging into an S&P500 or total market index fund will do better than any kind of strategy they concoct with a bunch of different asset classes.”
That’s a worthy take-away, one that is probably more effectively delivered in a classroom setting where teachers hit the pause button, explain key concepts with the help of other NextGen materials, and allow students to do things like rebalance, maintain an emergency fund, and keep their cash working for them in an index fund.
STAX has a number of advantages over The Stock Market Game, which is essentially a semester long contest where students use make-believe money but pick real stocks and follow them in real time. The Stock Market Game has its virtues. The investments are real stocks that can be researched and tracked. But the game naturally encourages students to invest with leverage and concentrate in potential high-flyers in order to win over a short period. STAX encourages students to think long-term, dollar cost average, diversify, and stay the course.
Here are some key STAX features:
Longer time horizon Students make investment decisions over a 20-year period, not 10 weeks.
More investment choices Students select from 11 different investment options, including savings accounts, CDs, index funds and stocks. This provides a more holistic view of one’s financial life and reinforces important concepts, like the importance of having an emergency fund. Each of the investments are unlocked over time to scaffold the learning for students.
Ongoing investment simulates dollar-cost averaging Every six months students get additional funds to deploy into the various investment options, allowing them to change their strategies on the fly based on market conditions.
Historical data lead to a different game experience each time With 35 years of market data for a game with a 20 year duration, each time students play they will get a new experience with opportunities for learning.
Students compete against each other while also trying to beat the market Class competitions are fun, but students also play against the computer, which buys index funds at every opportunity.
Incorporates behavioral finance concepts Students receive messages about stocks crashing and rising. Do they buy high and sell low?
Fast-paced game keeps students’ attention 20 years of investing in 20 minutes while 11 investment options rise and fall, pocket money coming in every six months and messages flashing across the screen intermittently.
As originally seen in the media platform, Right About Money.