Jambaz: Playing to improve investing performance

Playing games is a great way to keep your mind sharp. Brain Age, a Nintendo DS game, says it can "keep your DS brain in shape" (I don't think I have a DS brain) using the techniques of a Japanese neuroscientist. I'm always looking for a way to sharpen specific skills, whether it is thinking strategically or beating friends at poker. This week, I finally feel like I mastered the Jambaz investing game, coming in second out of 31 players that visit my personal blog.

It's in these more defined undertakings that I think computer gaming can be tremendously helpful, because a computer can help you try many more strategies quickly.* When you combine that opportunity to simulate more attempts at success with competition with the crowd, as Jambaz has with its stock picking game [click here to enter], which has been running the sidebar of this blog for the past few months, I think we can start to see how social gaming can be an important and worthwhile tool.

I've been an investor in the stock market for a long time. However, I am a buy-and-hold investor, looking for what I consider to be undervalued shares and keeping them for a year or much longer. There isn't much incentive, once a buy decision is made, to keep up on what is going on, because I'm confident that the returns will come. This has worked very well for me. I have no losers, and five stocks up more than 200 percent, in my portfolio now. At Marketocracy, where I've run a model mutual fund, I've sold only a few, and added fewer, stocks I bought since I started last October—my fund (listed as "MMF") is 23.24 percent ahead of the S&P 500 since its inception and up 35.59 percent on the year. I'm pretty comfortable with my picks.

Jambaz, though, gives me an engaging way to stay in touch with what is going on with individual stocks, getting me thinking about potential buys. Having been one of the alpha testers, I've been playing from the very beginning. Now, I am working with Jambaz to recruit more players, because I am really finding it is helping improve my market mind.

It took a while for me to see the benefits of the "exercise" of picking the next day's close for the stocks in my game. At first, I thought it would make more sense to have games that fit my buy-and-hold style, but having played a daily game and experienced a marked increase in my awareness of the activity around stocks I own or am thinking about buying, the daily pick is where the real value is.

I was a pretty bad player early on, albeit with Boeing stock I still suck--even though I've had big real gains with the stock I am running at zero-percent accuracy in the Jambaz game. As time passed, I found that I was able to pick the next day's close with increasing accuracy. It forced me to spend three to five minutes keeping up on stocks, something that my investing strategy has prevented.

Most of my stock holdings are in technology and finance, and those are the sectors I know best in my daily life. Using Jambaz, I was able to start experimenting with new sectors, particularly consumer packaged goods and food/drink stocks. During the last game I ran on RatcliffeBlog, I improved my daily picks on Coca-Cola (NYSE-KO) from near zero percent to 50 percent overall. By the end of the game, which lasted two weeks, my Coke picks were improving. The result? I now have a better sense of what moves this stock and, when I think the time is right I may very well add some to my real-world stock portfolio.

With stocks I really know well, like Apple's fast-moving and very volatile shares, serve as a kind of control sample for the game. Presumably, I should do well with Apple shares, even though they go up or down by several dollars a day, because it is something I've covered professionally.

Another interesting benefit is the traffic to my site is changing because people who play the game through the Jambaz widget on my site are returning more often. RatcliffeBlog had only 75 visitors a day before and has only about 90 regular visitors now, yet 31 players are using Jambaz through the site. I can imagine using the Jambaz widget as a standing editorial element—in fact, having a separate game for each stock you cover, allowing readers to join the speculation through the widget, could be a useful return-traffic driver.

How about a few tips? Well, Jambaz gives you the choice of entering prices two ways, as a literal price or a hot/neutral/cold slider. Choose the hot/cold slider, because it gives you greater leeway in choosing prices. With a very expensive stock, like Apple, the literal price range was often too narrow for me to pick accurately. Using the hot/cold range is a kind of fudging of the numbers, but when we are talking about sentiment, which is all that a daily stock price is made of, that's close enough for the game's sake.

You still have to look at what the stock has been doing recently, for what information may come to market in the next day, such as an analyst speaking at a conference or a quarterly guidance call, but Jambaz isn't easy when you choose the hot/cold slider, just more forgiving.

The other advice I'd give is to spread your game around. The widget is a doorway to a community of players, and you can wrack up points from many different games, not to mention get a sense of what a smart group of people are thinking about different stocks.

Ultimately, a game is the painless way to learn something or keep up on something. Just like fantasy baseball or football, which makes players a better observer of those games, picking stock prices is a habit for informed investors, even if they don't make daily trades hoping to carve out a few dimes or quarters on daily volatility. The attention given to the market improves one's analysis of stock movement. It helps me spot when the market isn't being rational, because that is the time to buy and hold. Just like the Japanese neuroscientist says of our brain's need for exercise, I'm finding the workout valuable.

*Someone once said "A computer lets you make more mistakes faster than any invention in human history, with the possible exceptions of handguns and tequila."