Today I saw an article about a high school Investment Contest , and like most contests of that type, it does not teach investing, but speculation.
I’ve wanted to try this for about ten years or so. I’d like to try running a stock picking contest, but only if I can offer decent prizes, and get enough participants. I’ve written about this before, these would be the rules:
Michael Mauboussin: Here’s what active managers can do
- No leverage and no shorting
- No trading — buy & hold
- No Exchange Traded Products, and only common stocks
- Minimum market capitalization of $100 million
- Only stocks traded on US exchanges
- Forced diversification — a portfolio of ten stocks equally weighted
- One stock from each of ten volatility buckets, to reduce speculation
- Highest geometric mean return wins — this gives a bonus to consistency, which also reduces speculation. (Alternative rule: the best return on the seventh best stock in each portfolio wins.)
- Six month time frame.
- One entry per person.
The most critical rules are seven and eight. The idea is to get people to think like investors, not speculators. By forcing investors to buy a broad range of companies from conservative to aggressive will force them to evaluate individual companies, with an eye to avoiding big losers. Rule number one, as many say, is don’t lose money. This would honor the idea of avoiding losses while trying to make gains. It would be a lot like what intelligent investing in a portfolio of stocks is really like.
The idea is to promote stock-picking. Now lest you think I have taken all of the speculation out of this, let me tell you what my rules don’t stop:
- Factor tilts — you can assemble a portfolio with price momentum
- Industry and sector tilts
- Foreign tilts
- Size tilts
- Valuation tilts
- Investing in special situations
- Copying famous investors
Investment Contest – Now, Who Would Be Sponsors?
I can’t fund this on my own. Also, I don’t think registration fees could fund such a contest. Parties that could benefit from the branding and free advertising would include financial information companies and brokerages — they are some of the logical beneficiaries of promoting stock-picking. So, would the following consider sponsoring such a contest?
- Wall Street Journal, Yahoo Finance, Bloomberg, Marketwatch, Reuters, Money, Value Line, etc.
- Nasdaq OMX, Intercontinental Exchange
- Schwab, E-Trade, Scottrade, Interactive Brokers, Ameritrade, Fidelity, ETrade, etc.
I don’t know, but I would want to have at least 1,000 entrants and $50,000 in prize money if were going to run a contest like this. I’m sure it would be a lot of fun, and would teach investors a lot about investing, as opposed to speculation.
Thoughts on an investment contest? Send them to me. (Especially if you are interested in sponsoring the event.)