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The Gazette, August 28, 2000.
Monday Business section.
Vitual High-Rollers
Simulated stock market games are mushrooming on the Internet
It took nerves of steel, but stay-at-home mom Christine Mackey is $2,000 richer. She was is the first-prize winner of the latest online investment game conducted on the Toronto Stock Exchange.
The TSE Investment Challenge is one of many simulated stock market games that have become increasingly popular on the Internet. The games mimic real online trading, while players compete in producing the highest portfolio value through different investment strategies.
"I didn't know anything about options trading until this game," admitted Mackey, who has won by increasing her fantasy portfolio by 242 per cent.
"I learned through the TSE site, and I thought I didn't have anything to lose with the game because I wasn't risking my real money."
Some TSE Challenge players have in the past managed to turn their mock investment account to six figures despite the roller-coaster-like markets. But with interest-rate hike fears and earnings reports announcements, success in the virtual simulation just as in the real stock market has not been easy. The majority of players end up with a lost of their virtual capital.
The purpose of the game is "educational, as a simulation of real life stocks trading," said TSE web manager John McNamara, adding that since the game was launched in March 1999 there have been on average 7,000 to 12,000 players registered in each round, and that these numbers are increasing.
Many who want to venture into the stock market through a discount brokerage and electronic trading to save a chunk on commission dollars worry that handling their investment themselves might be risky business. But games like these allow some practice beforehand.
Edward Testa, from Montreal, who took second place in the province and 21st in the TSE game overall, said that anyone interested in self-managing their portfolio should try out one of the challenges for at least six months to gain enough experience.
"Before the challenge, I only knew about investing theoretically," he said, adding that he had only invested for real through a broker.
But that is about to change after participating in three rounds of the games. "I've gained a lot more confidence. Once I've put more money aside, I'll start investing myself," Testa said.
Kyle Tiensovan, Cambridge, Ont., has been investing in the market for ten years, but was losing much fantasy money in the TSE game. He only managed to recover during the last few weeks of the round to finished second overall, and admits that there is always some learning to do.
"I learned that to make money you have to play options, but they're very risky. In the real market, you'd have to do a lot of planning, and there's always the luck element in there."
Internet portal giant Yahoo! has also been operating an investment challenge as part of its educational Finance section.
Tim Sheehan, Director of production of Yahoo! Finance, said he hopes "the challenge helps people become better investors. We're trying to let people know that they can empower themselves and manage their own money."
With 40,000 to 100,000 participants in its monthly round, Sheehan said that their site is focused on investors of all types. "We provide a finance education centre, so we have both fund managers and novices using our site to practice what they've learned and to research companies."
Brokerage firm TD Waterhouse has also entered into virtual-trading gaming with two versions--one aimed at students and teachers, and the other at the general public.
"We want to create an atmosphere of competition and teamwork among the student population. I think it helps youth in Canada learn about investing," said David Sypher, TD Waterhouse's president of Direct Channel.
But Sypher said that the target of these games is not to promote daytrading, but rather to create an "impetus towards active investing, and developing skills to research stocks and mutual funds." He said the games have been so popular that they have launched the InvestorRally in late July, a challenge created to hit a wider market.
The goal is for the "general public to understand the stock market and mutual funds, and achieve higher returns than they would with GICs or savings bonds."
Tiensovan said with the $1,000 prize he won, he's planning to invest in some equities for his son, because "I believe in 20 years, the shares will yield a better return than what I would get with a RESP."
Currently there are about two dozen investment challenges on the Internet. Players should check out the varying features of each version before registering. Some games allow a more sophisticated level of investing such as options trading and short selling, while others only let players hold long positions.
The real-time trading feature available on a few challenges makes trading closer to reality, but it could also be a disadvantage for players who don't have access to real-time quotes.
"Some people criticize these games because there are prizes involved so people are more risky than they would be with their money, but most players learn a lot," McNamara contended.
Playing under the name IMAWINNER, Tiensovan goes back for the current round of the challenge, hoping for better luck and a bigger potluck. "I'm aiming higher this time, maybe first place."
As for Mackey, the investing beginner said she still can't believe that she beat out some 7,400 competitors, including her husband who came in seventh place. She is also thinking of doing some investing with her money, for real this time.
Meanwhile, Testa says some wisdom he's gained from the challenge is that to succeed in the game and in the real market "you have to do as much research as you can."
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