The National - News
A VALUABLE EDUCATION IN INVESTMENT
▶ Young people taught the fundamentals have the tools to become financially savvy adults. Nada El Sawy reports
Afinancial analyst is giving tips on what makes a good equities and bonds portfolio in front of a group of attentive clients. They have each invested $100,000 in a shortlist of the global insurer’s funds – even though they are only between the ages of 13 and 17.
“Remember the ‘buffet of diversification’ we talked about a few weeks ago? Where you get access to all the food groups, all the asset classes?” John Astrup, investment product manager at Zurich Middle East in Dubai, tells the pupils at Gems Wellington International School. “That’s what you get in a pre-packaged solution. It’s like a bento box, getting access to all the healthy foods you should be eating.”
The money invested may not be real, but the highs and lows of fund returns are. The students are part of Zurich’s Investars programme, now in its second year. Over the course of six weeks, they monitor their portfolio, learn about market influences and understand the factors affecting the value of their investments.
Luckily, there is only upside at the end with the winner coming away with a Dh1,000 mall voucher. But the programme’s backers say more importantly, the teens gain exposure to investing, knowledge about personal finance concepts and experience in understanding their risk appetites.
The inspiration for Investars was an internal “fantasy portfolio” competition at Zurich. Mr Astrup and his wife, Eleanor, a business and economics teacher at Gems Wellington, discussed the idea of a similar competition for students as a way to make financial concepts more tangible and engaging.
Ms Astrup says the subjects covered in her academic classes include banking from a business point of view, but not personal finance or investing, in particular.
“Most of [the students] come into the programme with an interest, but not much knowledge,” she says. “Because they’re immersed in what they’re learning – they’re not just learning it by listening; they’re actually taking part in a competition – it gives them a much better understanding of the world of investment … skills that they can use as they go on in life.”
The importance of teaching financial literacy in schools is a topic that has gained global attention in recent years. In the UAE, the government announced a programme to promote basic financial concepts to pupils aged seven to 18 earlier this year, but it is unclear when this will be implemented.
Marilyn Pinto, the managing director and founder of Kids Finance Initiative, says her main worry with the Investars programme is that the students don’t have enough of the basic knowledge needed first. KFI runs financial literacy boot camps and sessions for children and teens, including “Investing 101”, but she advocates starting with more simple concepts.
“Investing is like putting the roof on the house, after you hopefully have good foundations, good strong walls,” says Ms Pinto. “It’s important to learn about investing, but the prior knowledge about just basic saving and budgeting and spending wisely are even more important.”
With Investars, the pupils hit the ground running. The programme’s rules are simple: students must select between four to 12 funds and allocate no more than 40 per cent to a particular fund. The weekly one-hour extracurricular activity, taking place on a weekly basis, includes investment tutorials and guest speakers.
For the first time this year, students had access to fund managers from Fidelity International, Schroders and Franklin Templeton, who served as their team coaches.
Salah Shamma, head of investment for Mena equities at Franklin Templeton Middle East, was a guest speaker at one of the sessions on the subject of how a company’s brand and valuation affect investment decisions.
“You guys are very lucky. I would have loved to have this when I was in school [and] was interested in the stock market,” he tells the students.
Ishika Yadavalli, 15, says she joined Investars because her dad’s stock market investments peaked her interest, as well as personal finance books such as Rich Dad, Poor Dad.
“I’ve read a lot of business books that say you should start investing early. I did not know what that meant, so I thought that joining this course would provide me with that,” says the year 11 pupil.
She says she took a “high- risk, high return” strategy with the majority of her shares in funds or equities with “two or three bonds just to balance it out”.
Debangsh Agarwal, 13, says he also opted for a “risky” portfolio and took a gamble on Japanese shares.
“Japan always fascinated me – it’s my favourite country – and technological advancement always had a higher ratio than any other single country,” says the year 10 pupil. “[Japanese equities] don’t do well at the beginning, but in the long term, they have a higher profit than any other share.”
The pupil who ultimately emerged victorious was 16-year-old Theerdha Saripella, whose winning portfolio was a “well-planned mix of equities – both developed and emerging”, according to Zurich. Theerdha generated returns of 4.96 per cent during the course of the game, while second place was not far behind with 4.70 per cent growth.
Does that mean these kids now have the confidence to soon invest real money in the real stock market? Mr Astrup says that is not the intention.
“What is important is for kids to start building up some experience – for kids to kind of feel what it’s like to make money and to lose money, as well as to have a good broad understanding of financial terms and literacy,” he says. “Whether I’d like the kids to jump into the stock market tomorrow? I’d certainly like it to spark an interest for them, but you want to build on it with more knowledge.”
Fiona McKenzie, head of Carfax Education UAE, says the “fantasy portfolio” concept, which she has seen in schools in the UK, is a good way to get teens excited about otherwise “dull” topics – such as interest rates, mortgages and pensions.
“It’s serving as an introduction into the world of finance. And hopefully that’s making them curious about how companies work, how profits are generated, what factors influence share prices,” says Ms McKenzie.
She says the value also lies in gaining research, analytical and decision-making skills. Ms McKenzie emphasises that financial literacy basics are not being taught enough in schools, but perhaps this is a first step.
“Schools should be teaching about interest rates and loans and mortgages and credit cards and all those sorts of things, but if this acts as a gateway into making children curious about the wider picture of finance, then I think that’s great,” she says.