A playground for honing financial skills

A playground for honing financial skills

Last week, Aishwarya Deep Shukla’s investments in State Bank of India dropped by 16.87%; the fall was on account of below-expectation fourth quarter results. But the loss didn’t perturb Shukla, because he didn’t really lose any money. The 22-year-old student of finance regularly invests in the stock market, but only virtually.

Shukla, who is currently doing his MBA in finance, is hooked to stock market simulation games.

What are these

These are computerized games available on the Internet that enable real-life experience of buying and selling equity shares on the stock markets. The process is such that you would feel you were really trading in stocks.

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The computer allots you money—virtual money reflected on your computer screen and not currency notes you can touch and feel. With this virtual money, you buy and sell virtual stocks and create your own portfolio. The stocks are priced at real market prices, but the feed is usually delayed by 5-10 minutes so that the information available on the portal cannot be used by people for actual trading.

Getting started: All you need to do is register with one of the many portals that offer these services and create a unique username and password, the way you do when opening an email account. Once registered, the game allots you virtual money to start trading.

Getting rewarded: Some of these simulation games offer incentives to those who do well. For instance, Stock Market Challenge, developed by Dalal Street Investment Journal (DSIJ) in association with Bombay Stock Exchange (BSE), offers daily, weekly, monthly and quarterly prizes to those whose portfolios see maximum appreciation. While monthly prizes include some goodies and a holiday package, the quarterly prize can win you a home theatre system.

Rediffmail India Ltd’s Marketwiz, too, offers members a chance to win prizes from time to time. “Of course, winning prizes is a motivational factor," says Mahesh B., a Mumbai-based businessman. Mahesh simulates in Stock Market Challenge. He won the monthly prize after his portfolio appreciated 200% in January. He plans to utilize the holiday package he won during Diwali to go on a family holiday to Lonavala.

Training ground

“It’s always a good idea to simulate before you start trading in the markets," says Sayee Srinivasan, head product strategy, BSE.

Most of these games are targeted towards students who wish to pursue a career in stock markets or those who want to learn how equity investing works before they start earning. “Those who are scared to enter the markets can use this application for confidence building. This platform is especially useful for beginners," says Monish Mehta, deputy manager, DSIJ. He expects Stock Market Challenge to have 65,000 participants by the end of this calendar year, up from 17,158 registered members at present.

“Simulation is a base on which people learn. It is a very good program in which one gets absolute exposure to the real markets," says Sanjiv Jhaveri, a professor of commerce at St Xavier’s College, Mumbai. Simulation has also been a part of the college’s investment analysis course.

Students at the National Institute of Security Markets (NISM), a research institute established by the capital market regulator, the Securities and Exchange Board of India, are also encouraged to simulate on markets. NISM also hopes to develop an in-house market simulation software for its own students in the next few years, some time in the near future.

“We give them theoretical inputs, and then make use of several tools to give them a practical feel; one of them is simulation," says G. Sethu, officer on special duty at NISM.

That is how Shukla also benefited. He says he does it just for fun but, “it helps me gain some practical experience to compare with my learning in the course," adding that he plans to invest in the stock market after completing his course.

Like Shukla, Mohit Agarwal, 18, an engineering student from Thakur College of Engineering and Information Technology, Mumbai, also plays simulation games. He says he is simulating to learn how the equity markets work. “I have made some losses as of now, but it’s only virtual money. Surely, this will help me make my investment decisions in the future," he says.

Do they add value?

Simulation games not only help students hone their investing skills, but also help people in their jobs. Before Oliver Dias joined Oracle Financial Services Software Ltd, an IT company that caters to the financial services industry, he was a relationship manager in India Infoline Ltd, a Mumbai-based equity brokerage house, and used to trade on the equity markets on behalf of his clients. This is a skill, he says, he picked up while playing online market simulation games.

He may not be dabbling in the equity markets as much these days, but his skills are still required as he is part of the team that provides solutions even to asset management companies to value their investments.

“Simulation has directly or indirectly helped me in both my professions till date," says Dias, 22, who started simulating at the age of 19 when he was a B.Com student in St. Andrew’s College, Mumbai. He says that simulation was the first step to his “successful career". He plans to start real investing in a year’s time.

Not all are smitten by the simulation bug. “Simulation packages do not necessarily add any value to an MBA student. Simulation is only for those who want to be day traders and full-time traders. So we attach no importance to simulation," says Kanu Doshi, dean of finance, Welingkar Institute of Management, Mumbai. He doesn’t foresee simulation getting included in the institute’s curriculum even in the future.

Mint Money take

Though simulation games offer a decent experience in stock market investing, we doubt if there’s genuine learning unless you put your own money in it.

Says Ranjit Dani, co-founder, Think Consultants, a Nagpur-based financial planning firm: “It may be good to learn the operational aspects of the markets, but unless you invest your own money, the learning won’t be great because people won’t take them seriously. This is because the emotional aspect is missing when you don’t invest your own money."

Besides, some games also allow exotic instruments (derivatives) and exotic strategies (short-selling) that we feel are best avoided. These are for experienced investors and are purely speculative in nature; beginners should best avoid them. But if you’re in for some harmless fun and wish to experience stock market investing, try your hand at it.

Graphic by Paras Jain/Mint