02 Sep 2026 Lessons From a College Stock-Picking Game

Let’s be honest, there’s a certain attraction to investing in individual stocks and trying to pick the next winner. Maybe it’s a need to act on the feeling that this or that stock has to go up because it’s part of the next world-changing technology. Or maybe it’s to relieve our FOMO. It’s hard to hear stories from our neighbors about making a bunch of money in individual stocks when the market is booming. (Hint: we only hear their success stories, and usually only during times of market enthusiasm.) I like to think a lot of it comes down to our desire to be wise, make good decisions, and see our wealth grow as much as possible. Whatever the reason, investing in individual stocks can be very appealing…and very difficult.

In the spring semester of 1995, I took a college investments class. One assignment was the classic stock-picking game. Each student got a hypothetical sum of money and chose a stock they thought would perform well over the semester. Many of my classmates gravitated toward companies whose products they knew well, like Anheuser-Busch, Disney, and Nike. I took a different approach and chose Bank of Boston, a relatively boring regional bank that I thought offered an attractive combination of value and growth.

As the semester progressed, it became clear that the students with the best shot at winning had taken a very different approach. They’d picked small, relatively obscure companies with enormous potential for short-term growth (and risk!). In a stock-picking game, that was actually a rational strategy. The money wasn’t real, so there was little downside to swinging for the fences. Plus, the goal wasn’t to steadily grow wealth over the long haul, it was to finish with the highest return over a short period of time.

Looking back, I realize how different that is from investing in the real world.

The stock-picking game was fun precisely because it removed many of the things that make real-world investing hard. To succeed at picking individual stocks in the real world, we have to get three difficult decisions right, what to buy, when to buy it, and when to sell it. Even if we get the first two right, selling a successful investment at the right time is tough and can be emotionally difficult.

What to buy. In the stock-picking game, you could take a huge risk without worrying about losing your life savings. You could put everything into one stock because diversification didn’t matter. In fact, it could work against you. If your goal was to win the contest, owning ten stocks that each had a reasonable shot at going up was less attractive than putting everything into the one stock that might double.

In the real world, it matters that we buy the right stock. Studies have shown that most of the market’s return comes from just a handful of stocks, while the rest have lifetime buy-and-hold returns below what you’d get from a one-month Treasury bill.¹ When we’re investing real money, picking the wrong stock can meaningfully damage our financial future. Single stocks can also experience dramatic losses, and large losses hurt. That’s why diversification matters. We aren’t trying to identify the one stock that will produce the highest return, we’re trying to build a portfolio that helps us reach our goals without taking on unnecessary risk.

When to buy and sell. The game also gave us something we rarely get in real life, predetermined buy and sell dates. Our professor decided when we would purchase our investment, and we sold it on a set date near the end of the semester. We were spared the hard decisions of timing, when to buy, when to sell. We simply held the stock until the finish line. In the real world, we might pick the right stock but buy it at the wrong time. Or we might buy the right stock at the right time, only to wait too long to sell and watch much of our return disappear.

And then there are taxes. We didn’t have to worry about taxes in our stock-picking game. In the real world, selling a stock held in a regular brokerage account can trigger tax consequences that materially affect the return we actually get to keep, and that can make the decision of when to sell even more complicated. I’ve had many conversations with people who picked a winner but won’t sell it because of the tax hit (and a host of other personal finance biases).

As you might have guessed, I didn’t win the stock-picking game. I made the mistake of choosing a boring regional bank instead of hunting for the next high-flying winner. Well, I learned a ton and the paper I wrote analyzing Bank of Boston was good enough to land me an internship at Smith Barney.

Thirty years later, I still think about that college stock-picking game. It taught me an important lesson about what investing isn’t. Real-world investing isn’t a contest to see who can generate the highest return. It’s about thoughtfully investing our money in the capital markets to generate a reasonable return, one that lets our money keep pace with inflation and grow so we can use it to fund our future goals. It’s about managing risk, diversifying appropriately, making thoughtful decisions about what and when to buy and sell, and weighing the tax consequences along the way. That probably seems less exciting than picking the next big winner but it consistently works. And, when it comes to our hard earned money I’ll take consistency over luck all day long.

_{The content above is for informational and educational purposes only. The links and graphs are being provided as a convenience; they do not constitute an endorsement or an approval by Beacon Wealthcare, nor does Beacon guarantee the accuracy of the information.}

_{1. Do Stocks Outperform Treasury Bills? By Hendrik Bessembinder. Journal of Financial Economics (JFE), May 28, 2018}