The Game: How To Teach Investing in 90 Minutes
I always struggle with ways to teach students the right lessons about investing. What are the right lessons? If I had to narrow it down to four concepts: 1) Know yourself and your risk profile (the best investing strategy comes undone if you can’t stick with it) 2) Diversify 3) Understand the relationship between risk and return. 4) Experience the power of compound interest and how it creates wealth. So, how did a 50-year old board game developed by 3M teach these concepts to a 9th grade classroom in a fun and engaging way?
I had to be creative to track down this game, Stocks and Bonds (product feature video here), but there is no retail search that Amazon can’t solve and I quickly snapped up a few lightly used versions of this game. I then tested it with my daughter to try and determine how this might work in a classroom setting. I drove to school on Monday still ruminating on how I would adapt this board game (how retro) to a 26 student classroom. I also wondered whether a 50 year old game would engage an audience raised on video games.
So, here is how the game unfolded. Apologize for the details here but this will help me next year when I am trying this again..
- Assigned the students to 2 person teams. Given that there are quite a few computations, I worked to ensure each team had a student with strong math skills. I also tried a little social engineering and paired boys with girls to see how it impacted decision-making.
- I divided the classroom into 3 groups. Four teams (8 students) comprised a Group, so there were 3 Groups. Why create groups? It makes the administration of the game easier.
- Each group had a Broker assigned to them. The Broker’s job was to provide stock certificates and ensure that the teams were accounting for trades appropriately. I chose brokers based on their computational skills as they would need to ensure team’s were properly accounting for transactions. Brokers were also teamed up with another student and participated in the game.
- Once students had gotten settled, their first decision was what stocks/bonds to invest in. They had $5,000 to invest and 10 stocks/bonds to invest in (see image below)
- The game designers make the math easy to start with stock certificates in increments of 10 shares and each stock priced at $100 so $1,000 per investment. Rather than have students read the descriptions, we summarized by focusing on riskiness of investment, yield (introducing concept of dividends) and growth prospects.
- Good opportunity to discuss strategies students can pursue: diversified (few stocks/bonds/mutual fund) vs. concentrated (betting on one stock), as well as risk profile (choosing only speculative (see Stryker Driller) vs. having a mix of companies (both growth and value).
- Students were given 5-7 minutes to come up with their strategy (might use a timer next time to keep game moving). There is a Transaction Form that students fill out (stock name, # of shares, share price, total value and a running cash balance). Once completed, they visit the Broker (who reviews their form) who provides them stock certificates.
- It was great how the game forced the students to talk about risk and return, dividend yields and growth prospects as they deliberated what stocks/bonds/funds to include in their portfolios.
- Based on their initial portfolios, students definitely got the concept of diversification. Most had mix of growth and value stocks and several had municipal bond also. Some focused on income and sought to maximize through a high yield strategy.
- To encourage long-term thinking, I modified the game to have students hold their stocks for at least five periods (years).
Let the games begin (the set-up took about 20 minutes for those keeping score at home)…note that this series of steps below would be repeated for the first five periods.
- We created a time machine to move the calendar ahead a year, so after telling students that we were at the end of year 1, we told them we had some good news: their investments pay annual income to them through dividends (stocks) or interest payments (bonds). The stock certificates had the dividend amount listed on them so they tallied up their income. They wrote this amount on their Transaction Form and added to their cash balance. There were hoots and hollers about getting cash for their investments; definitely more tangible then having me lecture about it.
- Next, a student was called forward (lots of hands volunteering) to 1) Pick a card that would indicate if there was a BULL or BEAR market (more terminology to discuss with students) 2) Roll dice which would determine the return for every investment option. I provided commentary as I updated the prices on our overhead projector (e.g., Stryker hits a gusher and is up 40 points…) and there were cheers and groans based on their results (good opportunity to discuss investor psychology). Once I updated all of the prices, students could calculate the value of their portfolios (I created a simple spreadsheet for them to fill in security name, # of shares, price per share, total value). I walked them through this exercise the first time and they were able to handle it from there.
- Since students didn’t trade for five years, we repeated this exercise (add dividends, bull/bear, roll dice, update prices and calculate portfolio value four more times. Students saw their cash balances rise, calculated the value of their portfolios (all were above the starting value of $5,000) and if their stocks rose above $150 price, they saw the impact of stock splits (stock price reduced by 1/2 but they received double the number of their shares).
- After the fifth year, students were given the opportunity to trade but only after given a sense of where they stood relative to other teams in the classroom. We listed the portfolio values by team on the board and there was much excitement (good lesson that we often don’t look at absolute returns but tend to compare ourselves to others) as the top three teams were eligible for a cash prize. In terms of trade activity, they learned that in order to buy a stock many of them had to sell one first so they learned about tradeoffs. Some had earned enough in dividends that they could buy a stock which was another valuable lesson. How did the trade? Some held tight happy with their results to date, others couldn’t wait to sell their losers and put the proceeds into a speculative stock that had a strong run (investor psychology at work again) and others doubled down on their winners believing past performance was somehow indicative of what would happen next. Great opportunity to have discussions with teams about common investor mistakes and biases.
The game continued for two more years and as we got close to the climax, student emotions rose and fell based on the performance of their investments. Good opportunity to discuss how we feel losses about 3X more than gains; this phenomenon was certainly demonstrated in class. We had to remind students after listing the final portfolio values for all of the teams that they had each generated significant wealth above their $5,000 initial stake. Amid the disappointment of perhaps not winning, they should know that their investment strategy had generated wealth, with almost all students in above a 40% cumulative return.
Despite running over 10 minutes in all of my three classes, students were anxious to continue playing the game. That is called engagement!! To get all of this accomplished in 90 minutes (or 100 minutes) required two teachers moving students along at a decent pace. Next year, I hope to have more time to observe student behavior.
When I asked students to reflect in a paragraph in what they had learned from this game, each of my four learning objectives were mentioned in some form. This reflection also provided me an opportunity to dispel some myths that students may have had prior to or picked up during the game too. I am already looking forward to using this again next year!
Let me know if you try this in your classroom!!
About the Author
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.