Skip to main content

The Globe and Mail

Do stock-picking contests fetishize risk?

“When we should be teaching young students about long-term investing and the magic of compound interest, the stock-picking contests offered by our schools are in fact teaching them about short-term speculation.”

John Foxx/Photos.com

Stock-picking competitions can be fun. But the ones used as educational tools in high schools and universities raise some concerns.

The time frames are very short, limited to the school term or less. In the case of the National Secondary School Stock Market Competition, they have been as short as two months or so. Such contests are usually won by betting everything on one or two very risky stocks and hoping Lady Luck intervenes. In other words, they encourage a speculative, "bet the farm" endeavour.

There is, of course, more to investing than this. Other aspects include asset allocation, diversification, cost minimization and long-term horizons. Indeed, academic studies say these factors influence returns more than stock picking.

Story continues below advertisement

Then there is a sizable body of research that says stock markets are efficient and impossible to beat over the long run, especially after trading costs are factored in. This suggests more emphasis should be placed on passive investing and choosing index funds.

As John Bogle writes in The Battle for the Soul of Capitalism: "When we should be teaching young students about long-term investing and the magic of compound interest, the stock-picking contests offered by our schools are in fact teaching them about short-term speculation."

READERS: Are student stock-picking contests harmless fun, or are they rewarding out-sized risk with victory?

Report an error
Comments

The Globe invites you to share your views. Please stay on topic and be respectful to everyone. For more information on our commenting policies and how our community-based moderation works, please read our Community Guidelines and our Terms and Conditions.

We’ve made some technical updates to our commenting software. If you are experiencing any issues posting comments, simply log out and log back in.

Discussion loading… ✨

Combined Shape Created with Sketch.

Combined Shape Created with Sketch.

Thank you!

You are now subscribed to the newsletter at

You can unsubscribe from this newsletter or Globe promotions at any time by clicking the link at the bottom of the newsletter, or by emailing us at privacy@globeandmail.com.