I have recently been taking part in the Strategy Lab Open which is a stock trading “game†in which everyone starts with the same amount of money and then trades stocks with it to try and make more than the other people in the competition.

While it has been fun and educational, I no longer view these games as realistic as I once thought they were. For one thing, in a simulation/competition such as this, you need to be much more aggressive than most people would feel comfortable being in real life.

In order to reach this level of aggressiveness, one must be continually monitoring and trading stocks in order to try and increase gains and minimize losses. While you must also keep a careful eye on your stocks in real life, a short-term loss will not have the same effect on your final outcome.

In real life, it is much easier to practice a more hands-off “buy and forget†strategy and this is in fact recommended by many advisors. The reason for this is because if you are continually watching the stocks in the way you need to for a competition like this and are looking at your own money (your future) you will be much more concerned with losses and may make decisions to sell at the wrong times.

Also, in order to achieve the high returns required to do well in a competition like this, you must take risks that you would likely not choose to take when your money is at stake.

In these games, you are also working with a very limited time frame. In this case, the contest is running from the end of July until the end of December. In real life, your time frame is much more long-term and the time is measured in years rather than months. This also leads to the investment decisions not being realistic.

Yes, these games are fun and can be a good way to learn more about the markets, but I don’t think that the results of these simulations can be used to predict how well someone is going to do in the real world, no matter how realistic they try to make it.