Using Online Games to Learn about Financial Markets

"Get off the games, you'll never learn anything useful or valuable and you'll just melt your brain!" Really mom? I'm playing this MMO with a spreadsheet in the next window to learn about the basics of investing using digital commodities and creating options out of them.

Allow me to explain. The premise of this works fantastically on MMORPG's because they try to emulate real life social encounters and many of them have thriving (or dysfunctional) economies where players can trade items of value for the things they want. Don't want the blade of ultimate destruction? Want 50,000 beers instead? Go ahead and trade it and go have the time of your life (then cry in your player owned house because you decided to trade a rare drop for kegs of alcohol...)

So now we have defined our terms, let's talk details. Take that 100 million cash stack you just have lying around and put it to good use. You can buy a bunch of items that players just want to dump on other players and turn it around almost instantly who want to buy it for more because they need it now and they're super impatient. This practice, often called flipping in games, is buying and selling to make a profit off the difference called a spread in real life financial markets. In real life there's dealers and brokers. Brokers don't own the stock they sell you, they're matchmakers. Dealers on the other hand do exactly what our flippers here in games do and are market makers in this virtual environment.

Flipping and dealing are the basics, but could something more complicated like asset allocation be taught? Oh yeah! Think of it this way, I have 100 million that's just sitting around doing nothing, I want to invest it, but I still want it to be liquid when I really need it (updates in game/life events in real life) so I pick 20 items to spread out the money evenly on (5% on each category) and I wait for a few days. Come back and 13 categories out of 20 have done well while 7 tanked. Good! Because we're going to re-balance but trimming the gains from the 13 to buy more of the 7 categories that have gone down. Why would we do that? Think of this as going to the grocery store. If something that you like goes on sale what would you do? Buy it most likely. The next week you go in you notice the price went up past where it normally is, now what do you do? Probably not buy it. So why is it the opposite with investing? Buy when people are selling, sell when people are buying, something you can easily learn by being in the game world and it's transferable into the real world. Buy high and sell low, remember?

Additionally you can take this portfolio and compare it to an index. The index can be used to track your portfolio's performance. Below is an example of a spreadsheet I made to track my portfolio in Old School Runescape. Take a look.

So this is after a first few days with almost 20 million in, and made 200k in a few days. Scale that up and you can make millions. The index is performing at 0.29% while the portfolio is at 1.04% almost triple. The index performance over the last 6 months was at almost 20-30% gains. So the profit potential for the year is almost 60%-120% gains. Not bad.

What you learn here is how to manage a fund and get insight into the basics of portfolio management. The real world equivalent here are equity traded funds (or ETF's for short). The Dow Jones Industrial Average is an ETF and so is the NASDAQ and the S&P 500.

So play all the MMO's you want without guilt, because you might be learning a thing or two about real world investing that has the potential to make you live a very wealthy life.

Have you tried some of the things here in the games you play? Have different methods and techniques? Leave them down below. I'd love to hear from you. Who knows, maybe you'll be featured in my next post. Like my content? Follow me (I follow back!) resteem and upvote if you found this interesting.