You don't have to be old enough to drive to play master of the universe. I'm just 15 years old, but in a national stock-market game sponsored by the Securities Industry and Financial Markets Association, I quickly grasped the way hedge fund managers must feel when they make decisions.
My friend Zachary Weiss and I had two months to beat 1,235 other groups of New Jersey high schoolers. There wasn’t any real money at stake, so we were playing for glory and, in the case of Northern Valley Demarest Regional High School, where we're freshmen, a tour of the New York Stock Exchange.
Unfortunately, we won't be visiting the Big Board. We didn’t even finish in the top half. But we learned some valuable lessons. First, that you shouldn’t have a two-month time frame in mind when investing. And second, that people do funny things when their own money isn’t at stake.
As the game was getting underway, my dad, who writes The Wall Street Journal's Ahead of the Tape column, showed me some of the most volatile securities out there, which my partner and I thought of as essential for victory in a short-term game where anything can happen.
Deciding the market probably would rise, we sold short securities that produced double the daily return of VIX futures. My dad explained that, on average, they should lose over 90% of their value each year. We also bought securities that did the opposite. We used the proceeds from our shorts and bought on margin, increasing our risk and potential return. Then Vladimir Putin came into our lives and we found ourselves in 1,016th place.
However, we weren't going to give up there. We took advantage of a bombed-out Russian stock market and bought an ETF tracking it for a quick gain. Then we took a big risk by shorting GW Pharmaceuticals PLC, a company riding the cannabis stock fad that had just hit an all-time "high," up 1,000% in nine months. That was our biggest winner.
In 16th place overall early this month and well ahead of nearly everyone from our high school, we had the tour of the stock exchange in the bag. But we wanted to win the whole contest and we rolled the dice again. Not a good idea. Knowing that natural gas was the most volatile commodity, we shorted a note that pays three times the performance of the fuel. Oops! A late spring cold wave later, we had lost over 30% on the bet.
We ended the contest in 706th place. The only consolation is that just 9% of our fellow students beat the S&P 500. Why? Most chose flashy stocks familiar to them, like Tesla Motors Inc. and Apple Inc., that also struggled over the two months we were playing the game.
Clearly, not every decision we made was the right one. But I don't regret our strategy. Our goal was to beat out a bunch of other teams that were all chasing crazy returns over a very short span, so we had to go big or go home.
We would have done it differently if we were saving real money for retirement. And if you're in the mood to take advice from a 15 year old, believe me when I say: you should too.
Jonah Jakab, a freshman at Northern Valley Demarest Regional High School in Demarest, New Jersey, is the son of Spencer Jakab, who writes the Wall Street Journal's Ahead of the Tape column.
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