Guys, I’ve just played the best game ever.
I mean, playing Cranium the other day was pretty great; except for the bit where my girlfriend was acting out ‘spring roll’ and I was repeatedly bellowing “ROLLING SPRING ROLLING SPRING” in utter confusion (we sulked at each other basically the whole game for not guessing right).
Where was I? Yeah, the best game ever. If you’re a fellow money nerd or you’ve ever wanted to try being a hotshot investor without actually losing money, this is the game for you.
It’s basically called ‘Who can make the most fake money on the ASX (Australian Stock Exchange) in a 13 week period’ (snappy title huh).
The rules were as follows:
- Everyone starts with $50k (of fake currency)
- They are able to buy/ sell anything listed on the ASX
- Can’t have more than 25% of your $50k in any one investment.
There were 18 people in the competition. I was invited in a by a friend.
If you’ve been reading my blog for long enough, you’re probably not going to be even a tiny bit surprised by what my chosen strategy was – and that it’s my chosen strategy for real life.
TEAM ETF (what whaaat!)
Yup, that’s right! My whole strategy was to buy and hold four ETFs for the duration of the competition, basically just forgetting that I was even involved. Didn’t even look at ‘em.
I’ve spoken at length about why this is generally the way to go for most investors in real life, but let’s recap.
- I have no idea what’s going to happen tomorrow or next month in the stock market
- Trying to time the market is a losing game
- Share trading on the regular incurs a lot of fees which make it even harder to profit.
This is a strategy that literally anyone can do successfully in the real world. All you need is to invest consistently for the long run.
With new investment providers like Sharesies out there you can set up a regular investment of as little as $10 a week. If you stick to it, regular investments of small amounts turn into big amounts over time (Check out my Investment Value calculator to see what your money could grow into)
Yeah yeah, I hear you saying. Talking the ETF talk like a big man. How did I actually do in the game, where people can recklessly chase the (fake) money and not be worried about losing anything?
Not too shabby at all
I came 5th out of 18 banking a tidy $4k (or 8% profit). I was ranked in the top 30% – take that, Wall Street.
Considering I put absolutely no time or effort into my picks and simply picked cheap index funds I’m pretty happy with that. On the whole 10 out of 17 people made a positive amount of $ on their initial investment.
I actually think this is a pretty accurate indication of how an index fund strategy might perform in the long-run. A lot of this is simply due to the fact that you’re not racking up fees all the time. Index funds basically guarantee an above average return over the long-run.
As always, don’t just take my word for it
I’ve recently been listening to The Barefoot Investor audiobook (seriously recommend, can’t believe I’m only just discovering this guy), and in it he talks about how even though the average yearly return of the US Sharemarket was 9% over a long period of time, the average investor only got a 4% return in that time. The average investor gets below average returns for a few reasons;
- They buy and sell at the wrong time, buying after a long positive run, and selling after a small downfall.
- They don’t diversify enough
- They don’t take fees into account.
It’s not too hard to be an above average investor. All you need to do is buy and hold a few low-cost broad market index funds of ETFs (like ones which track the NZX or S&P500) and then continue investing consistently.
Okay, I’m done going on about ETF’s. What were everyone else’s strategies?
At least one other person took a similar strategy to me for the most part. Most of the rest of the contestants bought and sold shares based on intuition and analysis. This led to some big gains, but it also led to some big losses.
A few of the contestants purchased shares in the company Quintis. The price of this company completely tanked after it was involved in a scandal. #sorrynotsorry, that’s what ya get. (I said smugly, looking down from atop my secure ETF mountain fortress)
This game isn’t just for super cool grownups – it’s used as a way to teach kids about the stock market, too
The ASX also uses this game as a way to teach high school kids about investing in the stock market. I think it’s great to teach kids the value of investing, and I’d love to see more done in that respect in New Zealand since a lot of us are woefully unprepared financially by the time we leave high school.
It’s great to learn how the stock market works, and anything that can get kids excited about investing and growing money gets an A+ and lots of gold stickers from me.
How would you teach high school kids about investing? Are you teaching your own kids?
What would I do next time
If I was to take part in a similar game again, I’d follow a very similar strategy. Except, I might make some active (gasp!) trades near the end in order to shoot for first place, because, ya know, in it to win it and I’m happy to go crazy with fake money just to see what I could do.
Taking part in a game like this was definitely fun, and it was a cool way to test a passive investment strategy against people that are trying to beat the market. It’s definitely something I’d recommend, and it’s a great way to get a feel for what investing is like without having to stump up any real cash. A new season has just started (seasons last for 13 weeks) but in the future, I might run a competition just for my readers!
Learn more here.