The gamification of investing

It’s no secret, I’m not a big gamer. But I’m in the minority. Two in three millennials in the US play video games every month and, on average, watch nearly six hours of gaming content each week according to a 2019 report from Neilsen’s* (and that was two years ago. I can only imagine how high those numbers got during lockdown!).

More recently, some millennials and Gen Xers have found a new game: investing. The pandemic has resulted in novice investors having more time on their hands and, in some cases, more money as there has been nothing to spend wages, furlough pay or those stimulus cheques on. The line between investing and gambling has always been a fuzzy one, but now it’s in danger of becoming completely blurred.

“Gamers always believe that an epic win is possible and that it’s always worth trying and trying now.” — Jane McGonigal, professional game designer

Investing as a game

Everything evolves over time and our investments are no exception. Many apps exist today that can help just about anyone manage their finances on-the-go. Investing is being put into our phones and into our pockets and is continually providing new opportunities beyond the traditional stock market.

Bitcoin and the recent GameStop story are examples of this. And runaway stocks like Tesla don’t help fight the “make money fast in the stock market” claims. As Morgan Housel explained on our recent podcast, as long as there’s enough “get rich quick” stories circulating on social media, people will continue to believe these are the norm and not the exception.

3 tips to avoid the gamification of investing

  1. Diversify: Buying a single stock is incredibly high-risk as you are putting all your eggs in one basket. To use a baseball analogy, each investment is a chance at the plate and another chase for a home-run.
  2. Understand what you’re investing in: The investment universe is enormous, from stocks to commodities. You have to understand what you are buying, the risk that comes with it and, of course why you’re buying it.
  3. Have a plan: Determine how much you can afford to invest, how much risk you can stand and how much you can afford to lose.

“Last year, you had 19-year-olds on things like Robinhood, some of whom were trading 5,000 times a month” Morgan continued. “Individually these are single investors with a thousand bucks in their account, but in aggregate, they’re incredibly powerful because there are tens of millions of them and they trade like we’ve never seen anyone trade before, because there’s nothing standing in their way.”

This ‘gamification’ of investing makes it all about the short-term thrill – the buzz of chasing a story today, which is fine for some, but others will benefit more from a long slow burn instead. As we heard on the podcast, Mick Dillion and Bertie Thomson, co-managers of Brown Advisory Global Leaders, only trade once a fortnight at best and deliberately ignore the short-term noise created daily in the markets.

Similarly, the T. Rowe Price Asian Opportunities Equity fund also has a low portfolio turnover, with a focus on quality and long-term holdings. LF Montanaro Better World is another example – a global equities fund looking for businesses making a positive impact on the world, with a philosophy of investing in growing companies and managers who refrain from over trading.

Alexander Darwall, manager of European Opportunities Trust, is also willing to hold investments for long periods. The trust is a high conviction portfolio of European equities with an excellent track record investing in medium and large sized companies. Federated Hermes Global Emerging Markets SMID Equity also has a strong buy and hold process, investing for the long-term in holdings and only selling them if they become overvalued or the investment case has broken down.

To me, investing is not just about building wealth (although that is a big positive!), it’s about making a better tomorrow through investing in companies that are aligned with our own ideals. Rather than putting money solely toward traditional investments, millennials are exploring a whole new world of options that continues to grow. Millennials are changing the investment market.

*Source: Nielsen, Millennials on millennials: gaming media consumption, June 2019

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