Am I Smarter than a Fifth Grade Investor?

Andrew McCormick, Head of eToro US

As a college kid in the early 2000s, in addition to chatting on AOL, I spent a lot of time thinking about my future career. I ended up in law school and eventually the world of investing.  Nearly 20 years later and I’m consistently surprised that critical financial and investing topics are not regularly taught in schools. While I hope that changes soon, in the meantime I’m committed to teaching my kids about these topics in simple and engaging ways.

As evidenced by spirited game nights, our family enjoys some “healthy” competition. My personal experiences have taught me the most effective way to learn is through practice, therefore we conducted a family investment battle.

The rules:

1. Each person received $50 to invest in my eToro account by selecting from available stocks, ETFs, and cryptoassets.
2. Participants had the freedom to choose how to invest: by going all-in on a single investment, splitting it into five different $10 investments, etc.
3. After four weeks, the highest investment return would be deemed the winner and got to pick the movie for the next family movie night.

Four weeks of checking our portfolios and some trash talk later, I ended up the winner. My portfolio took the prize largely due to NVIDIA, which is arguably the only thing on a hotter run in recent years than the Eras tour. On the final day, however, my presumed victory was in jeopardy as my Cybertruck-loving kid’s portfolio got a boost from a 22% jump by Tesla. While records weren't broken with my 3.36% return, I celebrated finishing ahead of the S&P 500 (0.9%) and a ChatGPT generated portfolio (-0.66%).

Below are the participating portfolios and what we learned from investing as a family:

1st Place: 41-Year Old with 20 Years Investing Experience: 3.36% Return

2nd Place: An Unspoken Age Rookie Investor: 0.54% Return

3rd Place: Eight-Year Old Who Loves Burritos:0.38% Return

4th Place: Kindergartener Passionate About Cybertrucks: -0.42% Return

5th Place: Ten-Year-Old Who Who Loves Tech and Jordans: -2.24% Return

6th Place: Another Ten-Year-Old Who Loves Wrestling: -3.92% Return

We also had ChatGPT create a $50 stock and cryptoasset portfolio. The below would have finished fifth in the family competition and so perhaps it’s not time to hand all investment decisions over to the robots yet.

Learnings

1. Don’t forget about diversification: The winning portfolio was also the most diversified, reminding us how powerful this concept can be when investing.
2. There are no guarantees: It's helpful for kids to see that you don’t always win in investing, and that the world is bigger than our own immediate lives. To my 10-year-old son, rarely seen not wearing Nike products, his Nike investment seemed like an automatic win, yet it was the lowest performer due to market forces well beyond his closet.
3. Accessibility: Despite all the math and government regulations associated with investing, it’s a concept that kids can understand and even get excited about.

It turns out that sometimes fathers actually do know best. More importantly, our family actually had fun investing together, proving that community can be an engaging and helpful part of the experience. Finally, we watched one of the many “Pirates of the Caribbean” movies for the family movie night.