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YOUR MONEY | FAMILY FINANCES

Fast-Growing Market Games Offer Plenty of Value

November 03, 1996|KATHY M. KRISTOF

The first few moments of Barbara Grubb's high school economics class is a lesson in pure pandemonium. Students scramble for newspapers; peek over each other's shoulders, trying to catch a glimpse of class rankings; and urgently ask questions about supply and demand.

While teens in other classes may take their time getting settled, chatting about dates and weekend plans as their teachers try to catch their attention, there's little time for that here. Grubb's students are anxiously scanning financial data, discussing market leaders and laggards and using their own proprietary systems for picking stocks to trade. One group decides to "short-sell"; another celebrates a savvy buy; still others hone their portfolios.

"We had the biggest one-day profit in our region," brags Zsombor Marfi, a senior at Los Alamitos High School. "We're keeping track."

Across the room, Shaun Fisher explains that his group favors established companies such as Nike and Motorola. Meanwhile, another student confides that he's a momentum player, jumping in and out of stocks based on daily market activity.

When these kids tell you they're "playing the market," they're not kidding. And they're not alone. Grubb's students are among about 650,000 kids, ranging in age from 8 to 18, who are involved in a stock market simulation called SMG-2000, designed by the Securities Industry Assn.'s education arm to teach kids the basics of market-based economics. It is only one of dozens of such games that appear to be gaining popularity with each year.

Times Mirror Co., for example, sponsors the Ticker Tape Rally; other newspaper companies offer similar games across the country.

Adult education classes are hitching onto the bandwagon too. Loyola Marymount University's latest Women and Money class, for example, includes a stock-picking contest.

Though there are no industrywide statistics indicating just how many individuals play games to introduce themselves to the financial markets, the SIA's program--the nation's largest--gives an indication of how fast the trend is growing. In 1977, it included 20,000 students in a few states. This year, the program is expected to enroll more than 650,000.

Indeed, the program has proved so popular that the SIA is creating a more sophisticated version for adults that will be available through the Internet, possibly as soon as next year.

What makes these games so popular is simple: They work.

At a time when Americans are increasingly being asked to make their own investment decisions by managing defined-contribution retirement programs such as 401(k) plans, it is distressing to realize that the average college graduate still has trouble diversifying his or her own investment portfolio, financial professionals say. Financial games can welcome young people into the complicated world of economic relationships, capital formation, profits, losses, trade surpluses and international competition. In the process, kids often end up investing their hypothetical portfolios with enough skill to beat the market professionals, organizers say.

Merely two weeks into the most recent stock market game, for example, one team posted an 8.7% return--after accounting for trading fees--which, annualized, would translate to a 226% total return.

Times in Education, a division of Times Mirror, hosts award ceremonies for regional winners of the Ticker Tape Rally.

"We had one group that earned $32,000 on their $10,000 initial investment," said Kathy Graham Headly, southern regional manager for Times in Education. That return was earned in just seven weeks.

Many credit this success to the fact that these investors are not intimidated. Most adults who invest worry about losing all or part of their money. They may be too conservative--or too quick to cut their losses and run--when investing for themselves.

In the games, the money is all pretend. Student traders, depending on their rules, will write down and submit their trades at regular intervals. When they win, they can get prizes. When they lose, all they've lost is time. That can make investors bold.

In some schools, the stock market lessons have served as a steppingstone to obtaining firsthand knowledge about how America's system of capitalism works.

David Kaplan, an economics teacher at the Julia De Burgos Bilingual Middle Magnet School in Philadelphia, introduced the game to a few of his students five years ago.

Since then, participation has soared to 170 students. That's spurred the school to start an interdisciplinary program in economics. And the students in this largely impoverished segment of north Philadelphia have formed their own corporation, naming officers, directors, secretaries and issuing stock.

"These students are learning that there's life outside what they see in their community," Kaplan says. "If they give us the energy to learn, they can achieve success."

What the games engender most, however, is a practical understanding of how the market works, how economic news can affect stock prices. That experience often produces savvy lifetime investors, organizers say.

"I don't know if we are creating a group of stockbrokers or if we're just creating a group of people who will grow up and not be intimidated by the market," says Headly, of Times Mirror. "In any case, it makes learning fun."

*

To learn more about the Securities Industry Assn.'s game via the Internet, visit the World Wide Web site at http://www.smg2000.org

Kathy M. Kristof welcomes your comments and suggestions for columns but regrets that she cannot respond individually to letters and phone calls. Write to Personal Finance, Business Section, Los Angeles Times, Times Mirror Square, Los Angeles, CA 90053, or message kathy.kristof@latimes.com on the Internet.

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