Monday, October 25, 2021

Introducing a stock market game built for entertainment education!

Stock market games have been a staple of economics, financial literacy, math, and business classes since before the internet. Research, real-world application, and competitive game play make stock market games a fun alternative in classes than can often be overly dry and factual.

The problems with traditional stock market games

For all the benefits of stock market games, there are some obvious and serious drawbacks.

Realism

How many people have been given $100,000 to invest for a short period of time? The stock market game is a fun fantasy, not a real-world skill. In fact, being given $100,000 detaches investing from how the necessary investment capital is formed; through working, earning, and saving.

Rewards risk, not thrift

The key to winning stock market games is to gamble on high-risk momentum or penny stocks, maximize margin trading and hope for a home run. The reality is that wealth is usually built slow and steady, not quick and easy.

Teaches the WRONG lessons

Successful students may believe they are ready to make big money fast and easy. GameStop and Wall Street Bets ring a bell? Those who lose money or just find it too complicated may avoid investing altogether or stick to "safe" investments like CDs. A recent Bankrate survey found only 23 percent of millennials say that the stock market is the best place to invest long-term. Yet it is impossible to save enough for retirement without equity investing.

Omits the important lessons

  • Successful tax-advantaged investing in a 401(k) or IRA
  • Importance of getting your employer-match free money
  • Load versus no-load mutual funds
  • Index versus actively managed mutual and ETFs
These are just a few critical fundamentals of investing missing from stock market games.

Budget Challenge Investing is the solution

How about a game with the engagement and competitive scoring of a stock market game, but put it in the context of managing the complete finances of an independent young adult? A game that teaches about long-term investing and the importance of an employer match and tax advantaged accounts. A game that regularly requires critical thinking and analytical and decision-making skills? A game that forces students to decide the tradeoffs inherent in a real budget. A game that rewards the behaviors and habits students really need to achieve financial independence and security. A game that is engaging, competitive, and fun where mistakes result in desirable learning taking place. Budget Challenge + Investing is that game.

Investing Rewards The RIGHT Investing Behaviors and Skills

Financial experts rarely agree on anything, but the only thing they do agree on is investing advice for young adults under 30.  

  • Start early
  • Use tax advantaged accounts
  • Invest aggressively
  • Avoid fees

Students Can Earn Three Investing Trophies

Traditional stock market games VS. Budget Challenge Investing

Classic Stock Market GamesBudget Challenge Investing
Never mind where the money comes from. Four out of five households do not have savings to cover six months of expenses yet isn't it fun to manage $100k!? If the starting fantasy gift of $100k isn't enough, students can ‘borrow additional funds' to really make it exciting. Each student will start with the same modest amount in their 401(k) that represents some past savings. This is typically less than $5,000. However, students can add to that every pay period based on how well they can manage their budget.
Classic Stock Market GamesBudget Challenge Investing
Student been given funds to invest (typically $100,000). This money should be invested without consideration for real-world concerns such as the advantage of paying down high interest credit card debt, putting some of the money for an emergency fund, or any tax consequences of short-term capital gains. Funds to be invested are what the student is able to budget, while paying recurring bills and balancing competing goals such as establishing an emergency fund, paying down debt, paying all bills in full and on-time.
Classic Stock Market GamesBudget Challenge Investing
Yes, students can trade single stocks, bonds, and mutual funds. There are typically four types of trades: Buy, Sell, Short Sell, Short Cover. Emphasis is on speculative trades with big payoffs or big losses. Assumption is that any trading gains are taxable short-term gains though this is not reflected in account balances. Trading occurs in the student's 401(k) account and like most retirement accounts, trading is restricted to mutual funds. No common stock trading. Emphasis is on long-term real-word tax-advantaged investing.
Classic Stock Market GamesBudget Challenge Investing
No, most games do not assess or withhold short-term capital gains from earnings or reflect capital losses that can offset earned income. Increasing investible contributions to your 401(k) results in a lower effective tax rate which is reflected on the students bi-weekly pay stub and in a table, which shows the take-home pay and taxes withheld at different 401(k) contribution levels.
Classic Stock Market GamesBudget Challenge Investing
Invest in individual stocks with high volatility to buy or sell short based on prediction of stock movement over short period of time (days or weeks). Use leverage (margin trading) and short selling to maximize gains at the risk of catastrophic losses. Big gains are celebrated. Losses do not seem so bad since the money was "free". Investing in mutual funds with low fees for the long term; accepting more risk due to 35 to 45 years until retirement time horizon. Choose either passive proven strategies (stock index funds) or actives strategies (selecting funds expected to beat the index) with a long-term investment horizon. Taking advantage of the employer match to increase the investable funds. Students who are able to budget the greatest contributions will usually perform the best.
Classic Stock Market GamesBudget Challenge Investing
Yes. Stock market games use live data and execute trades at the end of each trading day. Yes. Budget Challenge uses historical data adjusted for inflation and executes trades at the end of each trading day. Historical data captures authentic market behavior but de-emphasizes frequent trading based on predictions of market movement.
Classic Stock Market GamesBudget Challenge Investing
Emphasis is on winning which is determined by the highest portfolio valuation at the end of the contest. Trophies are awarded for different investing behaviors: creating a portfolio with low fees, executing on a passive or active investing strategy, and choosing funds most appropriate for long-term retirement investing. Value of student's 401(k) plan is factored into overall performance score. The skill required to save for retirement while still paying other bills on time and reducing debt is reflected by the wholistic scoring of the simulation. The student's investing performance is part of an overall score that measures their demonstrated financial capability.
Classic Stock Market GamesBudget Challenge Investing
Students who win significant money learn that it is easy to make big money in the stock market by buying speculative stocks, day trading, and using margin. Students who lose significant money learn that the stock market is risky and that "they are not good at investing". These students may conclude it is better to keep their money in "safe" investments like CDs and money market accounts long-term rather than suffer big losses in the market. Students learn it is important to invest for retirement early in low fee stock mutual funds. That by investing in a tax-advantaged retirement account they actually pay less in income tax and do not pay annual tax on gains that accrue. They learn they should try to max out their employer’s 401(k) match, taking advantage of real “free” money.

Student Tutorial Videos

FAQs

Teachers who sign up for fall simulations will be able to choose to add +Investing.
The main objective of +Investing is to emphasize the importance of investing for retirement. The trophies, activities, and daily performance feedback will demystify this important topic and empower students to invest confidently for retirement in the future. The importance of this cannot be overstated. Defined benefit contribution plans have largely disappeared. According to current projections, the average high school student today will live to celebrate their 100th birthday. Almost all of our students will be responsible for their own retirement. Even if they work for an employer with a generous match, our students will still be responsible for selecting their own investments. +Investing gives them specific hands-on experience that will prepare them to succeed in this critical task.
To add +Investing is an additional $5 per license.
You do not have to do anything. We have already added enhancements to your students' 401(k) accounts. They now have an investment portfolio with 95% index fund/5% bond fund investment default. Their balances now show daily changes reflecting the change in their investments. So there are now more teachable moments and realism in the existing simulation. +Investing offers additional features, three trophies, and additional lessons, and resources.
You can try it out now for free! Log in or register for a teacher account and join the Teacher Challenge. You will be able to try out +Investing in the context of the full simulation and be entered into our raffle for a chance to win up to $1,000! Refer a coworker for additional entries into the raffle.
No. +Investing adds three additional trophies and the possibility of significant additional points as well as some other functionalities to the simulation. The good news is, there is a passive investing option, which is actually what most financial advisors recommend.
Passive Investor is actually the preferred method for the vast majority of people to successfully invest for retirement. In fact, the point is, that it does not take trading skill to successfully invest for retirement. It takes knowing what to invest in, starting early, and sticking to it. All of these are taught if the student chooses Passive Investor. We're expecting that most Passive Investors will beat Active Investors because that is what happens in real life.
No, and this will not be an option in the future. +Investing is designed to illustrate the connection between saving money on a budget and how to invest those savings for retirement. Because of this, +Investing does not work without the students deciding how much to contribute to their retirement savings.