What rules should be set for a "fantasy stock picking" contest?

Question

I'm pretty into stock trading, as are several of my friends, and we love to joke around about trading and debate strategies. It's a hobby for us just like watching sports or a TV show, and we all have long-term portfolios doing pretty well.

We've talked about doing a contest where we all pick stocks and see who can do better in a given month. What rules would you recommend making to keep it fun?

Here's what I'm thinking:

• We each open accounts with some other broker than our main portfolio, with a set amount like $500.
• No one knows each other's stocks but we report each week what our balance is.
• We either can trade as much as we want or just rebalance once a week, but no more money can be put in after it starts.
• After 30 days, whoever did the best gets everyone else's gains, minus 22% to cover short-term cap gains tax. So everyone gets their original buy-in back, but the winner gets $100-150.

We've done fantasy basketball and football pools with $20-50 buy-ins so the idea of "owing a friend money" won't be an issue. I'm also not interested in hearing how picking short-term gains isn't indicative of "being a good trader". I know that, this is just for fun. Has anyone done this and has any other rules you'd recommend to keep it fun?

Answer 1

I would use virtual money with virtual accounts. Start with $100,000 each. Stocks only, use closing prices. Agree beforehand which stock exchanges can be used.

Use Google sheets (collaboration) to document. Each person can only edit their own sheet. All players can view other players sheets. Periodic snapshots of other players sheets will deter cheating.

Each person puts $50 (or $100) real money into the pot at the start. Highest return (or least loss) wins all.

Note that these rules will likely lead to some desperate trading by those who are behind near the end of the game. I think that this would be great fun, but if you don't like this, you could use a reward system proportional to virtual profit.

Answer 2

Suppose by some miracle, one guy turns $500 in $2,001 and another guy converts $500 into $2,000k. Ignoring taxes as well as gains from other game losers who made some money, the runner up has to give up $1,500? That's a far cry from "the winner gets $100-150".

Another idea might be to give everyone who didn't lose money a share of the P&L in terms of percent. Anyone who lost a portion of his $500 seed money does not participate in gains. He just gets back what remains in his account.

Anyone who increases his account value above $500 gets a share of the total gains of the group based on what percent he increased his account value above $500. This provides multiple winners but it does penalize the best performer. He makes more than the others but loses a lot if he increased his $500 X times.

Answer 3

Lets do some math. The average market return is 10%, so 10%/12months = 0.83% average return/month. Now lets do 0.83 * $500 = $4.17 average return for a month. The short term volatility of the stock market will probably have larger gains/losses, but would everyone be fine with all this hassle for $5 on average per person? If I were playing, I would suggest these rules:

• $500 or $1000 portfolios (depending on how much everyone can afford) that get reset on the first trading day of every 2 months instead of every month. Just a little more time to let your portfolios grow and swing
• Stocks only, no mutual funds/bond funds/etfs/reits/partnerships. This is to help keep the game interesting and avoid everyone picking the same market indexs
• Have a google spreadsheet or a shareable document so everyone can update the current balance of their portfolio. The group would decide if you do this weekly, biweekly, halfway through, or something.
• The winner gets gains minus 22% OR $10. Whichever is greater
• People who fall below the original $500 still have to pay the $10 minimum
• If everyone falls below the $500 starting point, no one gets the cash. (I view it as everyone was a loser that round)
• At the end of the round, everyone has to print out their transaction history to prove they played fair
• Cutoff for the round is the Friday before the first of the month. That way everyone has the weekend to take a snapshot of their portfolio

This last point is about how to start the next round. I'm not sure how stingy you want to be on this, but I can see people pointing fingers saying 'you started this round with $502 while I started with $498!'. So these are some guidelines on how to start a new round and avoid any excess trading costs. It's not perfect and I encourage you to tweak them to what fits your friends the best.

• At the start of the next round, you don't have to sell and start with 100% cash if you don't want to. You just have to sell any stocks/withdraw cash until your balance is at about $500.
  • If the first day of the round is on a Saturday/Sunday/Monday, you need to have a portfolio of $500 by the end of the day.
  • If the first day of the round is on Tuesday/Wednesday/Thursday/Friday, you need to have $500 at the beginning of the day.
  • Any dollar amount above $500 gets subtracted from your 'total gains/loss' at the end of the round.

As I final note, I would only do this if you trust everyone with money/financial statements. You know all players are familiar with finances and basic algebra (in case there are any disputes). No one is in any credit card or gambling debt. You can all agree to end the game if it starts causing bad blood between friends.

Answer 4

I'm setting up something similar and I believe it can be simple and manageable.

Everyone picks their stocks or ETFs or bonds by Jan. 1st along with associated percentage of 100k investment. So for example SPX 50%, MSFT 25%, AAPL 25%. No changes allowed after Jan. 1st. I have a google sheet that calculates the current value automatically. Person with highest value at end of each quarter gets 20 euros off the other members. And that's it. It's a shared google doc and automatically pulls in current share values. Keep it simple.