Thursday, July 5, 2012

Create Smart Investors on the Virtual Stock Exchnage

This week I am away on an offline vacation. Rather than let the blog be dormant or rerunning old posts I decided to give some other people a chance to share their experiences and ideas with you. I hope you enjoy the posts. 

The Virtual Stock Exchange Game at MarketWatch offers a challenging interactive experience that is completely free and online. Users create a fictional portfolio of investments whose value goes up and down as it would in the real stock market. The players’ net worth is ranked on a scoreboard, adding a competitive element that makes it like financial fantasy football.

Despite the controversies currently surrounding Wall Street, there is plenty of value in teaching a stock market simulation. However, teachers and students should first understandings a few things. Investing success is not guaranteed, and thus assessments cannot be tied to the amount of fictional money students make or lose. The activity should also have a long time horizon – a month at least, a semester or year ideally – so students experience the market’s fluctuations. And of course, everyone must know the basics like what a stock is and how companies sell their stock to the public. An excellent collection of videos that explains these and many other concepts can be found at Investopedia.

Everyone who participates in the Virtual Stock Exchange needs to register with a valid email address. As the teacher setting up the game, I recommend giving players a relatively small amount of money like $10,000 and choosing the normal version of the game that does not allow certain aggressive financial maneuvers. This will minimize distractions and keep students focused on learning about their investments. There is also an option to keep the game private and password protected.

Once students join the game, they will be eager to begin! They may need some guidance to complete their first stock purchases, as all the world’s investment possibilities can be overwhelming. A good starting point is the Dow Jones Industrial Average and the S&P 500, two indexes of large US corporations. Students will be familiar with many of them and their stocks tend to be less risky than smaller companies.

Once they acquire a few stocks, students can learn to investigate those companies in depth using Google Finance. They can compare a company to its competitors, see its recent mentions in the news, and look at detailed measurements about the stock (which they can learn to read from this video and this article).

As time and curriculum allows, there are plenty of opportunities to go deeper. Students can diversify their portfolios to include stocks from different industries and a balance of large and small companies. They can also learn about different types of investments like mutual funds and exchange traded funds (ETFs), which the Virtual Stock Exchange does include. A summative project is a possibility for students to reflect on their performance and share what they learned.

The Virtual Stock Exchange can be done as a curriculum unit, an exploratory, or an after school club. It offers a multitude of connections to math and social studies content; students crunch numbers and learn about companies that provide the goods and services they use every day. But above all they practice a process of informed decision making, as success requires background research and following current events. And of course, it’s fun! I play along with my students and learn new things every time.

Christopher Panna currently teaches economics and history at the International School of Port of Spain, Trinidad & Tobago. Next year he will begin a new post at the Walworth Barbour American International School in Israel. His previous articles are available on Instructify.

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