Hat tip to Sid Sharma for pointing out this fascinating article. Imagine knowing stock prices one week into the future? Better yet, imagine getting these future stock prices every week for the rest of your life. Such is the plight of Max Herve-George as featured in this story in the Independent: 

George, 25, is not a rogue trader. He is not a financial genius. He is just a man who has the life-long right to make investments with Aviva France that are guaranteed to succeed – to Aviva’s cost. Guaranteed? Yes, because  George has the right to invest in upwards movements in the markets after they have happened. Imagine being allowed to fill in a winning ticket for the Euromillions lottery after the draw has been made. Max-Hervé George, in effect, has that right.

He holds a “known price” life insurance contract, obtained for him by his father when he was seven years old from a French company which eventually became part of Aviva. This contract, an investment vehicle rather than a classic life insurance policy, allows him to switch his funds to profit from weekly upward movements in markets.

“For example,” he said, “the Asian markets went up 5 per cent recently. After the event, I was able to instruct Aviva to move my money into Asia at the prices which applied before the markets rose.”

Imagine that you were hired by Mr. Herve-George, who was wondering whether his financial advisor was giving him good advice in terms of where he should be shifting his investments. It notes in the article that he earned a 68% annual return. Can you find a better strategy to earn more than 68% over the past year?

Assume this limited investment set using popular ETFs (ETFs: index funds that trade throughout the day instead of just priced at end of the trading day):

• S&P500 (SPY is ticker)
• FTSE Developed Markets covering Europe, Asia and Canada (VEA)
• Emerging Markets fund covering developing markets such as Brazil, China and India (EEM)
• Russell 2000 Index covering smaller and mid-size U.S. companies (IWM)

I have created a spreadsheet with weekly closing stock prices for each of these ETFs for the past year (thank you, Yahoo Finance). Here are the steps required to complete the spreadsheet. I leave it up to you how to customize for your students based on their spreadsheet knowledge (please send me any of your ideas so I can share with the community):

• What are the investment returns for each weekly period for each investment? (Columns G – J):
  • (Week 2 Price – Week 1 price)/Week 1 price
  • Note that I have entered the formula already in the cells to calculate these totals
  • So, based on his contract, the assumption is that at the end of every week, Mr. Herve-Geore selects the investment that went up the most in a given week, BUYS it at the price it closed at a week ago and SELLS it at the closing price the following week to lock in his gains.
• What is the best investment return in a given week (Column K)?
  • Use the MAX function which calculates the highest number among a range of numbers.
  • For example, in week 2, the maximum return is .78% for the Emerging Markets ETF.
• What is the value of the investment? (Column N)
  • Assumes that you start with $100
  • Take the MAX return (column K) and multiply by the previous periods investment amount.
  • For example, starting with $100, multiply that by (1+Max return) or (1+0.78%) to get $100.78 as the amount you would have after period 2.
  • See the formula: =N6*(1+L7) where N6 is the prior week Investment amount multiplied by (1+ Max Return for the week). 
• Did we beat the 68% return?
  • Take the final figure in week 53 for investment (highlighted): $205.78
  • Use the similar formula that you used in Columns G – J:  (Week 53 Value – Starting Value)/Starting Value
  • ($205.78 – 100)/100 = 105.78%

With that sort of return, you might get the job to manage his investments!!!! Good luck!!

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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