For many children, one primary exposure to just a piece of financial literacy is the Stock Market Game. The public elementary school I attended pitted a hundred or so fourth-graders against each other. After a few months, the student with the highest overall account value, not taking fees or expenses into account like the real world, was crowned the winner. Money management would not be a topic in the curricula I experienced for the remainder of my public school education.

A private school with a $30 million endowment is taking the Stock Market Game a step further, by giving sixteen-year-olds $100,000, raised by parents, friends and alumni. This investment club will play the stock market with and for real money. The head of the school believes that this type of real-life experience is more effective in education than the funny-money stock market simulation games.

One of the club’s student vice presidents just happens to have a father who is on the school’s own investment committee — a group of adults who manage the school’s endowment. The club’s original idea to manage a small portion of the school’s endowment was met with a cold response, so the school raised the money specifically for the club.

Real money means real consequences.

The stakes are higher, and knowing that the students could lose real money might help them take a more conservative approach to managing money and taking less risk. Yet, this $100,000 was given to them. They didn’t have to work to earn this money; they did nothing but ask for $30,000 to $50,000, and they were pleasantly surprised when $100,000 fell in their laps.

The stakes are higher than those for students playing the Stock Market Game in fourth grade, but they aren’t real-world stakes. Managing other people’s money, while an important role, is not the same is managing one’s own money. The skills they might be learning might help them prepare for a career as an investment manager, but might not lead to any positive skills for household money management.

The students could be ignoring social responsibility.

Due to their environment, these students might not have any idea how privileged they are. Unless the club has a faculty adviser who endeavors to teach more than just trading in the stock market, they might miss an important concept when dealing with money. There are so many struggling high schools in this country, both public and private.

While $100,000 in one community could help a struggling school afford basic educational necessities or could help an overcrowded school hire an additional teacher, the money raised here is designated for teaching one lesson that may not be all that necessary. It’s somewhat of a false argument; anytime you spend money you could ask yourself what right you have to spend it when there are children in the world who desperately need it to survive, but continually framing spending decisions in that manner will surely lead to insanity.

Generally, people make up for the guilt by being socially conscious, at least when they’re aware of their privilege.

Trading in the stock market is not investing.

If the students truly want to take a long-term view, they’d be less concerned about beating the school’s own investment committee. Various studies have shown that people simply can’t, over time, beat market indices. They should be investing in index funds, full stop.

If their investment-manager parents and the club’s adviser aren’t leading them in this direction, the students should at least be learning how investment managers and the financial industry do make money — through transaction fees, load fees, and management fees, all which come out of customers’ pockets regardless of whether the investment choices overperform or underperform.

Stock picking is no better than gambling. That doesn’t mean you shouldn’t invest in individual companies, but it generally works out for the best if you can invest like Warren Buffett: invest enough money to have a say in the company’s operations, or invest in preferred stock so you receive a better deal than other investors.

Overall, the club’s investment philosophy isn’t terrible. It’s better than most individual investors. Even just having a philosophy sets them apart.

The club’s 30 students outlined an investing policy, which limited them to companies worth at least $1 billion. Diversity was also key to their plan. They decided to take stakes in two companies across six sectors… and not allow any single company weigh more than 15% of their entire portfolio… So far, they’re down about $2,500… Though the recent ups and downs in the market make the students anxious, they remain optimistic and are maintaining a long-term view… The students admit they can be a bit obsessive about checking on the portfolio’s performance multiple times a day, but who wouldn’t be? The students also plan to rebalance the portfolio every six months to a year.

Jobs in the investment management field could well be in their future.

How do you feel about this school’s decision to raise $100,000 for its investment club? Are the students learning good financial lessons?

Photo: Flickr

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Yesterday, I was motivated to further clean up my excess financial accounts. After a long delay, I moved my main accounts into a revocable living trust, a legal entity I created earlier this year to keep my finances in the best order possible.

As I visited Wells Fargo yesterday to move my primary checking account into the trust, the customer service representative was surprised that someone so young would be establishing such a trust. I intend to live a long time, but it’s better to be safe. After years of an expanding portfolio of financial accounts, the purpose of which has been to review savings, checking, and investment accounts for the benefit of Consumerism Commentary readers, I crossed the point of sensible manageability and am now consolidating and closing what I can.

A few weeks ago, in the effort to clean up my financial accounts stemming from the desire to put as much as possible under the umbrella of my trust, I sold what remained of my former employer’s stock that I had previously earned in the form of significantly discounted shares. The last time I sold my former company stock was in 2011.

Overall, the sale locked in good profits, selling at multi-year highs, but had I held on a little longer I would have benefited from an even higher stock price. Timing the market never works, but I can’t complain too much.

These shares were held at E*TRADE, though it wasn’t my choice. The company required all employees participating in any of its stock-based incentives, like the company stock purchase plan that offered shares at a discount of at least 15 percent, to hold an account at E*TRADE.

Over the years, I hadn’t encountered any problems with E*TRADE other than slow transfers from external accounts. I’m not a fan of the $20 fee to sell shares awarded by my former employer; in fact, the whole situation seems like a racket considering the requirement to use that particular account for all company stock incentives.

Closing an E*TRADE account isn’t very intuitive. At first glance of the brokerage’s website, I didn’t find where to submit an account closing request. I then did what most people would do: I searched Google. The top results pointed to a content farm website, where would-be writers submit articles and videos and get paid little if anything for their editorial contributions. The website aggregates possibly millions of articles supposedly explaining “how” to do various things.

The website’s articles on this particular topic, supposedly helpful for people like me looking for a clear guide on how to accomplish a task companies generally try to dissuade their customers from accomplishing, were incorrect, and the video was completely useless: Summarized, “First, open the website. Then, follow the instructions to close your account.”

Undeterred from low-quality help, I spent some more time wandering around E*TRADE’s website. Of course, financial companies would prefer their customers not close their accounts, so they make the process more annoying than necessary. I discovered this reality when I looked into closing a Bank of America checking account in the face of their latest fee increases.

If you’re wondering what the process for closing an E*TRADE account is today, here is what you do:

• Once you log in, you’ll see your Complete View. Below your account list, there is a link: “Need help? Click Customer Service Online.”
• If you click those words, you’ll be presented with a customer service page, with the first tab, “Customer Service Home,” activated.
• Click the second tab, “Self Service.”
• When the Self Service page is displayed, you will find a link for “Account Closure Request” under the heading “Account Service Requests.” Click that link.
• On the “Close Account” page that comes up, select the account to close if you have more than one at E*TRADE. Select your reason; account consolidation is always a good choice.
• Repeat the process for any other accounts you may have at E*TRADE.

My account has been ready to close for the past few weeks. After selling what remained of my former employer’s shares, I transferred the proceeds to an external account. I’d use the money for further investment or to pay current expenses — it doesn’t really matter, since once the money is in my bank account, a dollar from investments is the same as a dollar from income or other sources. All dollars are created equal once they’re mixed together.

When I logged in yesterday to close the account, I saw I had $0.03 in accumulated interest. Before closing the account, I initiated a final transfer to move the $0.03 to a linked checking account. I didn’t immediately see an option for letting E*TRADE keep the interest remainder, and it seems counterproductive to initiate a transfer, which probably costs E*TRADE about $0.10 per ACH. Also, I’m not exactly the type of person to pick up a nickel off the street. But the three cents were there, so I initiated a withdrawal, then proceeded with closing the account.

With my E*TRADE account closed, I’m getting closer to full investment consolidation. Just about all of my investments, retirement and non-retirement, are now at Vanguard. There are still some stragglers, notably the retirement accounts at Fidelity and TIAA-CREF. I also have a few shares of an exchange-traded fund in the telecommunications sector, IYZ, at ShareBuilder, where I also hold a few shares of Toyota, Akamai, and Microsoft. All have paid off well since I purchased them despite some turbulence, except for IYZ.

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