“Outfox the Box”
One of the best ways for people to conceptualize the benefits of passive investing is a game called “Outfox the Box”, created by author Bill Schultheis and found in his book entitled, “The Coffeehouse Investor”, a link to which can be found in the Reading Room.
The game is deceptively (and almost deviously) simple. There are 10 boxes from which to choose from. Which box do you want?
|
|
$1000 |
$2000 |
$3000 |
$4000 |
$5000 |
|
|
$6000 |
$7000 |
$8000 |
$9000 |
$10,000 |
It’s not that difficult to figure out. Everyone wants the $10,000 box.
OK, let’s change the rules just a little. You are now asked to choose a box from here:
|
$8000 |
?? | ?? | ?? | ?? | |
| ?? | ?? | ?? | ?? | ?? |
Now what do you want to do? Is it worth risking a lot to gain a little?
In other words, do you risk getting less than $8,000 for the prospect of $9,000 or $10,000? This is when most people opt to take $8,000. Passive management/indexing works as a strategy, as illustrated by the fact that 75% - 80% of all mutual funds do not beat their benchmark indexes.
Care for a little game?
“Outfox the Box” is a game I intend to share with the Girl Scouts to help make our workshops together a little fun.
A short note (that needs to be said): I have borrowed heavily (okay, stolen) from Mr. Schultheis’ website here and claim no ownership of his brilliant idea. My intent is to help make this game and his book more well known, *not* to steal his work. If asked, I will remove this blog entry.