The Stock Picking Game
The Stock Picking Game is a good example of how easy it is to make an investment choice. Investors, like many people, are good at having an opinion of a future outcome, whether or not they understand the facts, variables or risks involved.
The rules of “The Stock Picking Game” are simple. Pick one stock for each of the ten years from the market of seven stocks. You can pick the same stock for ten years or pick a different stock each year. After the final selection in year ten, we will calculate the compounded average return of your selected investments over the ten years. Each stock is assigned a letter of the alphabet as its trading symbol. There are seven companies, as represented by the following stock symbols:
- Stock A
- Stock B
- Stock C
- Stock D
- Stock E
- Stock F
- Stock G
Each company is of similar financial size, based on assets and revenues. Let’s assume each company stock price is currently $100. All of the companies are covered by investment analysts, and all currently have a Buy rating and a one-year target of $110. The companies do not, and are not expected to, pay any dividends over the next ten years.
After picking a company in year one, it is assumed that if you pick a different stock in year two, it means that you sold the year one stock and no longer own it. To keep the game simple, we will ignore trading costs and taxes.
Objective of the Game
- Evaluate whether you can pick the right stocks, over a ten-year period and outperform the average return of all seven stocks over that same time frame.
- Compare your ten-year stock picking returns with the average returns of your friends and family.
Disclaimer: The "Stock Picking Game" is meant as an educational tool. This is a simulation, and not an actual portfolio.