DELMAR — Once in a while, stock market investors get lucky earning big returns with short-term investments. For Bethlehem Central High School student Tao Xie, however, it seems to be more skill than luck.
That’s because this high school junior has reached the top three in the New York State Stock Market Game not once but twice. Last year, Xie finished first among all students in New York State participating in the virtual investment competition. In the most recent Stock Market Game held earlier this year, Xie finished third out of more than 3,700 teams competing. The contest, sponsored by SIFMA, is an online simulation of the global capital markets that engages students grades 4-12 in the world of economics, investing and personal finance.
In the Stock Market Game, students are challenged to develop a successful investment portfolio by investing a virtual $100,000. Xie’s portfolio grew from $100,000 to $244,340 in three months, an incredible 144% return.
“This year, I mainly focused on short-term trades that could bring me handsome returns quickly due to the limitation of time,” said Xie. “I noticed the irrationality in the sudden rally of the heavily shorted “meme” stocks, such as GameStop, AMC, and Koss Corporation. Even though it did in the short term bring these stock prices ‘to the moon,’ I knew that it wasn’t going to be sustainable.
“So, I decided to heavily short-sell these stocks when I saw that the stock prices of these meme stocks had jumped to ridiculous levels. I had the firm conviction that over a longer period of time, these stock prices would fall massively back to their fundamental values. Fortunately, my strategy proved to be successful in a very short time frame,” he said.
Despite his ability to “identify extreme irrationality in the stock market and position his portfolio to capture the massive gains,” Xie takes a more measured approach when looking at long-term success in the stock market.
He credits the Stock Market Game — which he discovered with the help of teacher Jason Majewski and the school’s Stock Market Club — with providing him with what he says is an “opportunity to explore investing and trading strategies that I don’t usually dare to try in real life.”
“Personally, I like to stay out of these more volatile stocks and invest in more reliable or more trustworthy stocks that over the long term would offer me a higher chance of a good return,” said Xie.
Xie admits his success in the stock market simulation games has resulted in requests for stock picks.
“Occasionally people do ask me what stocks to buy. Most of the time it’s from my friends,” said Xie. “I tend to give more ambiguous answers because no one can accurately predict the stock market.
“My advice for people who want to learn about investing or building personal wealth would be to buy some stocks and try stuff out,” said Xie. “The best way to learn about the whole system is by being in it. Buying some stocks and putting some personal stake into the stock market would certainly motivate people to learn about the financial system. It is also a good idea to keep a close eye daily on the news as that keeps you updated with information that could be important for your investments.”
Xie, who owns some stocks of his own and plans to study finance or finance-related subjects in college, also shared a philosophical view of finance that goes well beyond his years.
“Finance is very interesting to me,” said Xie. “I almost find it magical how by allocating capital to the right places we can both solve problems in the world and make the capital grow.”