Ever since I found a stock market simulation posted on Quartz, I wanted to see what the results would be after each student in a class played 3-4 rounds of the game. Could they collectively beat the market? I blogged about it in August 2015 and the curriculum team developed a more robust activity using this simulation. A week ago, I got that chance to answer the question.

First a little background to get you up to speed. Here's a quick synopsis of the investing game:

This simulation uses prices from the S&P 500 for a ten year period (this ten year period changes every time you play the game too!) which unfold on this graph at the rate of about one year of data every 6 seconds.  Here is a screenshot after seven years elapsed (note the talking head on the left which provides tempting advice as the game unfolds).

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Here is a sample output after the game is completed (total time per game play is about one minute):

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What you just saw is exactly how the S&P 500 performed from the week of May 16, 1986 to the week of Apr. 26, 1996.

You didn’t beat the market.

The $10,000 you invested turned into $20,262 [ACTUAL BALANCE on spreadsheet]. If you hadn’t made any trades you would have made $7,812 more—leaving an ending balance of $28,074 [BALANCE IF NO TRADES]. At the time you reinvested, your trade had cost you only $4,112 but it ended up costing you $3,701 more because of the compounded gains you missed. Want to try again?

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Each January, I get the opportunity to do a 3-day intersession at the Nueva School in San Mateo, California (they invited me back this year so I guess that is a good sign:). This year, I decided to include this simulation. Why? 1) The thrill of trying to beat the market engages all young people 2) students experience the feelings of euphoria, regret and loss that come from investing in the market 3) It only takes about 15 minutes 4) Each student participates, and there is also a group goal too. 

I started by projecting the simulation on the screen. I explained what would happen over the next minute would be the price action for an index fund (the S&P500) which we had discussed earlier. The students would be owners of $10,000 in this fund and would need to make two decisions: when to sell and when to buy back in.

We played one round as a group which I modeled for the class. I  would hit the SELL button when I heard enough students shout "SELL" and I would buy back into the market when enough students shouted "BUY." I then hit START and the simulation got rolling. Students shouted SELL as soon as the stock price rose 20-30% and then were mortified as the market continued to rise (the regret of missing out on a stock market rise can really hurt). When they decided to buy back into the market they knew that, at least in this round, they would not be beating the market. And they didn't!

Next, I pointed students to the numbers that they would need to add to this spreadsheet as they played each round. Here are some ground rules I set:

• I offered a prize if the class could "beat the market."
• Students have to both SELL and then BUY during the game. You can not do the equivalent of "buy and hold" and do nothing.
• Students cannot immediately hit SELL and then BUY to try and match the market. Several students tried this tactic. 
• Af the conclusion of each sim they played, they had to take a screenshot (command-Shift-4) so there would be some verification of the results they put in the spreadsheet.
• Students should play as many times as possible in a 15 minute period (most got 4-5 games in) 

So, how did they do? Here are the results from this spreadsheet:

• 79 games played (about 4 plays per student)
• Market return: $1.966 million
• Student return: $1.777 million
• Percentage of individual games where students beat market: 48.1%

Here were some of the comments that i heard from students:

• "That was really hard to do [beat the market]."
• "Every time I thought there was a pattern [in stock prices], I was wrong."
• "Might beat the market by a little but when they I missed, I was wrong BIG TIME." 
• "It was hard to sit and watch the market go up after I had already decided to sell."

Give this activity a try and let me know how it goes!

About the Author

Tim Ranzetta

Tim's saving habits started at seven when a neighbor with a broken hip gave him a dog walking job. Her recovery, which took almost a year, resulted in Tim getting to know the bank tellers quite well (and accumulating a savings account balance of over $300!). His recent entrepreneurial adventures have included driving a shredding truck, analyzing executive compensation packages for Fortune 500 companies and helping families make better college financing decisions. After volunteering in 2010 to create and teach a personal finance program at Eastside College Prep in East Palo Alto, Tim saw firsthand the impact of an engaging and activity-based curriculum, which inspired him to start a new non-profit, Next Gen Personal Finance.

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