6 min read

Gaming the Market

Forwarded this email by a friend? Subscribe here.

Email header with the "For What It's Worth" logo, graphic that includes a hand holding a representation of a blooming flower that has money blooming at the top, and the tagline "Insights to invest in the world you want" underneath it.

Kids’ screen time may be a hotly debated topic among parents and daytime talk show hosts in the US. But in China, the government has gotten involved, as it tends to do with most things, and is quite literally laying down the law in homes. Regulators have ordered online gaming companies to restrict play time for children to a maximum of three hours a week. The state-owned media dubbed online gaming "a spiritual opium,” which if you know anything about the history of China, is a pretty layered and harsh take.

This aggressive policy comes amid a broader government crackdown in the country on various industries, including e-commerce, gambling, fintech, and for-profit education. Perhaps foreseeing more rules, on Monday the owner of TikTok said the app would limit Chinese users younger than 14 to 40 minutes a day between 6 am and 10 pm These bans are affecting shareholders in Chinese companies around the world – the KraneShares CSI China Internet ETF is down 40% this year – and officials are reportedly trying to stem the flow by reassuring Wall Street executives.

It’s also looking like it won’t end there. The growing scrutiny of online gaming here at home in the US is prompting the creation of a new category of negative screening for socially responsible investors. Investors use negative screens to exclude industries they don’t approve of from their portfolios, like tobacco or fossil fuels. According to the head of screening research at MSCI, some have been asking for ways to avoid games with addictive qualities, gratuitous violence, and the “loot box” feature that has been compared to gambling. A screen to exclude video game companies that produce explicit content already exists.

Could investors turn on companies that don't consider their impact on the young consumers they target? So far we have not seen much action from investors on this but we will keep an eye on it.

Don’t put all your eggs in the same basket

Graphic of full carton of eggs with one egg outside carton.

Nearly half of investors (49%) between ages 18 to 34 who received coronavirus stimulus checks invested some of it, according to a recent survey. Their most popular choices were buying individual stocks (15%) and cryptocurrency (11%).

This isn’t surprising, and we promise we’re not clutching our pearls. We get it. Investing in a company or digital coin you believe is on the rise is exciting. Young investors can usually afford to be a little bold, and apps like Robinhood and Coinbase have made it easy for them to participate. We also know there is a lot of excitement from young investors in ESG and sustainability-focused investing, with 64% of young investors saying they make investment decisions based on societal problems that are important to them. But finding real, long-term success with stock picking or crypto trading is very, very hard, even for experienced investors. It’s so notoriously difficult that famed investor Warren Buffett placed a million-dollar bet that elite hedge funds couldn’t beat a basic S&P 500 index fund over a decade. And he won.

The rest of this content is available to our amazing subscribers. Want to read it?
Subscribe now to our free newsletter.