This week I taught Class 5 of the Investment Beginnings series I’ve been doing with the 12+ year olds.
It’s the last class in the series before we do “labs” in July. During lab, we’ll convene when the market’s open and I will give each kid individual attention as they execute an investment. I want to make sure they know how to read the screen, navigate their broker site, see the confirmation of the execution etc.
This last class was special. I’ve been posting all the materials online and there are families following along remotely. One dad sent me an app that consolidated and vibecoded the slides and games. He and his son worked on the project together:
https://investment-class.vercel.app/
And this next part blew people’s minds in the class, not to mention my own. A mom brought her son from Miami because he’s been obsessed with the class and wanted to be here in person with the other kids. I’m speechless. Supermom and superkid.
We took them to dinner with my family and brought along my son’s good buddy so our visiting friend would know a few people before stepping into the class. I can’t gush enough about how nice this all was.
When Class 5 ended, a lot of parents came to talk to me and said all this kind stuff and gave me totally unnecessary, generous gifts (I would have done the same so I get it but also just feels like too much). The most important thing is how all these kids’ gears are turning. It feels like a no-brainer to really clean this up (I learned a lot from doing it and know how I’d mod it in the future) and turn it into something. Maybe a well-produced YT thing, but I’m stretched pretty thin. We’ll see, I guess. Famous last words.
Anyway, here’s the outline of class 5 and link to all the materials from the classes.
Class 5 — Making Trades & Reading Markets
- Different kinds of auctions and how markets are continuous auctions
- The order book: bids, asks, spread, and what “depth” actually looks like
- Price discovery as consensus — the price aggregates what everyone knows
- Market hours, plus what pre-market and after-hours really are (and why beginners should avoid them)
- Public vs. private markets, with real estate as the bridge example
- How an IPO turns a private company into a publicly traded one
- Why baskets exist: the easy button for diversification (callback to Class 4)
- Three kinds of baskets — index, themed/sector, manager-picked
- ETF vs. mutual fund: same idea, different checkout (auction all day vs. one daily NAV)
- Index construction math: cap-weighted vs. equal-weighted, with four real stocks
- Why SPY and RSP — the same 500 names — can produce materially different returns
Homework: talk to parents about a brokerage account, ahead of the July lab where students place their first real trades
We spent much of the class doing a mock trading game:
How the game worked
There are 16 kids.
- Each gets 2 cards — that’s private info
- There are 3 “stocks”: Hearts, Spades, and Red
- At the end of the game, each stock settles to the sum of the cards held collectively in that category across all 32 dealt cards
- Card values run 1 to 13 (ace to king)
Kids bid, offer, and trade with each other based on what they think final settlement will be. They log transactions on index cards they carry.
Every few minutes, news hits — I reveal some of the remaining 20 cards. These are cards that will NOT contribute to the value of the 3 stocks.
The Teaching Moments
Basic valuation
- What’s the maximum value of each of the 3 stocks? (Also a fun way to teach someone to quickly compute the sum 1 to N.)
- What is the fair value of the stocks at the start of the game, when no common information has been revealed?
Information and private signals
- What is the fair value of Hearts if you’re holding the 9 of Hearts?
- Ask the kids: what’s a good hand to be dealt, and why? (A very simple exploration of what “information” actually is.)
- After news is revealed, how do you update fair value? Walk through the exact math.
Reading flow
- Your fair value is always subject to adjustment based on flow. What is Alice’s bid generally saying about Spades? What is Mike’s offer suggest about Red?
- At the end, computing P/L is a big exercise — marking trades to settlement.
We didn’t go into crazy depth on any of these. Just getting a basic understanding easily takes a group of 16 kids an hour, and even then some are lost. Totally expected. Honestly, many adults are too.
It’s super interesting to see who gets it very quickly though.
The origin of the game
This was the first trading game I remember doing as a trainee at SIG. All the new hires in NYC played while the trainees who had been around for 3-9 months traded options on these “stocks.” Their hedge orders would get sent into our trainee market!