The other day I received an email from a member of the Steps Foundation, promoting their latest fundraising venture, an online stock contest with play money and real stocks. For a $50 entry the biggest portfolio after 1 month (contest starts June 25, though one can apparently enter late, and ends July 26).wins half the money from the total of entry fees (I cannot find the rules on the website, maybe they appear after one has paid, but I know because the email I received had the rules attached). Now the Steps organization looks legit (yes, I did check it out some since scammers are not confined to Nigeria) and their aim to raise funds to support other organizations that actually teach financial literacy by debt counseling and that kind of thing does jive with what I try to do informally with this blog. So I do have some sympathy for their aims.
However, the contest itself exemplifies the very worst way to approach the stock market, as a kind of short term lottery to make the most money in the shortest time. Maybe the Steps people, who are all financial professionals themselves, intend to write something afterwards to say "don't actually try to invest like this in real life, because you will surely lose all your money in a very short time". Given recent market action, the best strategy might well be to sit tight with the initial play cash anyway. That would certainly be a fitting and truly worthwhile financial lesson if it did happen.
Maybe if they modified the rules so that the winner would be the person with the highest Sharpe ratio aka most return per unit of volatility they might provoke some real financial literacy by obliging people to learn about and to consider that important concept and it might be a good contest too, instead of a pure game of chance.
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2 comments:
Thank-you for your feedback. The team at Steps Foundation appreciates that you have taken the time to create a post about our charity. It is evident from your prior postings that we share a common goal: to improve the financial literacy of Canadians. Steps Foundation engages in multiple fundraising initiatives, volunteer recruitment efforts and awareness campaigns in support of essential financial literacy programs. Part of our strategy is to engage members of the finance community. Our latest initiative is the Bay Street Stock Market Challenge, a stock simulation competition.
We do appreciate you posting about Steps Foundation on your blog to raise awareness to our charity, but it would have been preferred if you had taken a step back to see the full picture of what our charity does and the purpose of this particular fundraiser to have the post in a more positive light. As with many fundraisers, we are trying to draw an audience that would be interested in supporting our cause which is financial literacy, not those who are in need of the support (which is what the proceeds will go towards). We have moved forward with the selected format to make it interesting for those who are avid investors, as well as to invite others to do research and explore potential investment strategies, while supporting a good cause. Although not the main reason for the event, participants may end up learning valuable lessons about the stock market, which would be an additional benefit.
As a start-up charity, this is the first year that we are running the competition, and we welcome any feedback on how we could improve this for future years. As with any start-up, it was difficult to forecast enrollment and sponsorship, so we decided that a 50/50 prize split was the best format for this year. In future years as we grow in size, we anticipate that all prizes will come from sponsorships and would not take away from funds available to support our charitable initiatives.
Please note that we are accepting late sign-ups for the next few days, so all those who are interested are still welcome to join.
If anyone has any further questions, please do not hesitate to send an email to info@stepsfoundation.ca and we would be happy to answer them.
Sincerely,
Steps Foundation
www.stepsfoundation.ca
FWIW, the Steps folks can take solace in the Oscar Wilde quote "There is only one thing in life worse than being talked about, and that is not being talked about."
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