![]() ![]() And indeed, there is an important body of research in finance that shows that individual investors, particularly men, sometimes trade too much and are overconfident. Committees in both the House and Senate have held hearings on regulation. But with the dramatic rise in shares in GameStop, AMC, and other “meme” stocks, driven by social platforms like Reddit, there is a raging debate about whether the “democratization of finance” has gone too far. Investments in financial markets can be an important way for individuals to build savings, and diversify their risk away from their personal and local economic conditions. How the filibuster rule affects the chance for President Joe Biden to push through sweeping bills on climate change versus narrower bills through budget reconciliation. We also note that because index funds have become part of the orthodoxy of institutional investment, companies within the benchmark indices can also be overvalued.Īs I teach politics and economics at the Stanford Graduate School of Business, we also discuss how the different stocks in his portfolio, and the economy as a whole, could be affected both by dramatic political events like elections, but also less exciting but crucial issues: How trade deals like the U.S.-Mexico-Canada agreement might affect U.S. We discuss how low-cost index funds provide a sensible means to do this, and to be wary of funds that charge high fees for exposure to the same sets of assets. We discuss the importance of spreading his investment choices across different companies to reduce the risk and to invest for the long term. We talk about his investments and what drives their value. It’s fun, and a great chance to teach your kids not to behave like those who got burned when their investments plummeted. My son and I invest only a few dollars a week. And companies like Robinhood and its competitors should encourage learning the markets rather than just speculating in them. Not only that, I encourage you parents to do the same. I am an economist, yet for two years I have encouraged our son, now 9, to choose stocks for us to invest in together on Robinhood, the site now notorious for drawing inexperienced investors into risky trades. Investing games can educate people about the market, rather than just encourage speculation.
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