For the past couple of weeks, several times a day, my 10-year old daughter and I have been talking about the stock market. At school, in one of her 5th grade classes, she and her class mates, along with many others of her age, are taking part in an on line game called, The Stock Market Game. Each team is given a fictitious $ amount and then they are let loose on the Stock Market, buying and selling as they please. It has led to some interesting conversations.
Jasmine and her team decided to buy shares in Hershey because their teacher had told them that in the future, chocolate might become a delicacy. This sparked a debate. I asked whether or not that was a good investment? Would the long-term value of the company increase if that companies access to raw materials was being hindered? She then explained that they bought the shares because Valentine's Day was approaching, after this weekend, they intended to sell them.
Then there was Apple. Last week they wanted to buy Apple shares but were advised against it by her teacher (and myself) because we had both read that Apple had lost its innovative edge and was being caught up by other companies. Jasmine agreed and told me that her team had decided Apple was so expensive that they thought that there was nowhere for Apple shares to go, but down.
The immediate lessons she has learned from this is that playing the stock market is hard. The price of Hershey stock has jumped historically before Valentine's Day each year, so there is a way to make a short-term profit on the stock market. Apple just announced record quarterly profits, making the case that there is no ceiling where some companies are concerned, and Apple customers are very loyal. This is all well and good and most would say that this is a great game for kids in school because many lessons are being learnt.
But I do have my doubts.
Playing the stock market is gambling - you wouldn't play a game in school that gave kids $500,000 of make believe money and then let them play 5 Card Stud or Texas Hold-Em. You could say that letting 10 year olds invest such large sums in the stock market is tantamount to saying, "Its okay to gamble, kids." I do wonder if any teams just sit on their $ and do not invest? That would surely be the best cause of action in most cases.
Then for me there is another moral issue. Most gains made on the stock market usually come at the expense of someone else. One person's gain is usually another person's loss. Is teaching our children to become the 1% something we should be encouraging? I'm not so sure.
Differ with my views or not, I think the main lesson Jasmine has learnt from all this, is that it is probably not a great idea to listen to your father when buying stock market shares.