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A Stupid Contest and a Better Idea



April 14, 2014 – Comments (3)

I spotted a Tweet about the WSJ Student Index University Trading Competition earlier today and honestly I can’t believe they are even doing this. Here’s the link:

I mean I get it, it’s a business that’s trying to gin up interest in investing with the younger crowd. But it’s a stupid contest and I’ll tell you why.

It’s not built to last

It’s just a game, I get that. But to communicate to someone that if they can manage an imaginary portfolio for the next 28 days that it will be some indicator of how great a trader they may be is a joke. You can try trading stocks all you want; I wish you all the luck in the world. But trading stocks for the individual investor is ultimately a coin flip and over the long-run it’s simply unsustainable. Of course the traders out there will tell me I’m wrong, and that’s OK. Everyone makes their own decisions in the end and I can respect that. It’s not impossible. But it is dangerous and it’s no way to grow your wealth over time.

Of course I’m going to tell you that business-focused investing is the way to go (we call it investing Foolishly); it’s what I do for a living. But there are reasons for that: It’s a lot of fun and if you can make the commitment to do it, it works. And you don’t even need to be a stock picker to invest. Heck, just buy shares in an index fund or ETF pegged to the S&P 500 and keep doing it month in and month out. The key is time. Younger investors have a lot of time with which to work so it’s imperative that we teach them this point earlier rather than later. It’s why I’m teaching my kids about investing today at 9 and 7 years old.

I have a better idea

I have a better way to communicate the power of investing for students, beyond what amounts to a pointless exercise in guessing. I would like to see high schools require a financial literacy course for students each and every semester. For incoming freshmen the first semester covers the basics of investing. Why we do it, how to do it, what kinds of businesses make for attractive investments, etc.

At the end of the first semester each students get a hypothetical $10,000 with which to buy stocks. They must “purchase” a minimum of 4 different companies but no more than 10 and then hold them for the remainder of the student’s high school career. Upon graduation the results are made official and students can see what they’ve done. Some will win, some will lose but the bottom line is it will teach kids about business and investing at an impressionable age while allowing a respectable amount of time to pass in order to demonstrate the power that time can play in one’s portfolio.

Incentives for this could relate to college credits or even financial assistance awards for those who participate. There needs to be some incentive, but it should be something that can be framed as an investment as opposed to a gift card and an interview with a trading firm. I wonder how many jobs will actually be awarded and further how much long-term value will be created from such jobs?

Know the options

I bet that the companies, colleges and universities that promote this type of learning about investing on the other hand would see some real benefits over time. And there’s no question it would at least present the window of opportunity for younger prospective investors to get in the game sooner rather than later. While everyone ultimately will make their own decisions it would be nice to make sure they are making them based on the best options out there.

Foolish best,


3 Comments – Post Your Own

#1) On April 15, 2014 at 12:28 AM, CMFbbmaven (100.00) wrote:

Well said Jason

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#2) On April 15, 2014 at 4:30 PM, AltData (32.13) wrote:

That is a better idea. Even more so would be to make it part of the "Common Core" math curriculum in High School.

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#3) On April 15, 2014 at 7:39 PM, jerryguru69 (97.44) wrote:

Hard to argue with this one. 

How about: the time period is 12 mos. They can trade as much or as little they want, and adopt any strategy they wish, but trading fees will be deducted. They can choose their own benchmark: SPY, DIA, QQQ, VTI. They get $$$ for college equal to the amount they beat their chosen benchmark.  

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