In Grand Theft Auto 5, one of the new features of the game is the ability to trade in game stocks. As an actual investor, this seemed like a fun little side quest for me. To tell the truth, the GTA stock market is not a very accurate representation of the real world (big surprise, right?), however, there are some real world lessons a novice investor can take from the game.
The most substantial way to make money in the GTA stock market is through the assassination missions. The idea here is that you sabotage one company so that their stock goes down in value and their competitor’s goes up. While I certainly don’t condone corporate sabotage in the real world, the lesson to take from this is that big news will dramatically affect a stock’s price in a short period of time. For dividend investors like me, if an otherwise solid company with a decent dividend ends up getting some bad press and having their price swing down, it’s a great opportunity to pick up their stock on discount. In the game, these price swings were 50-100% in a matter of minutes. The biggest swings I’ve seen based on news have been around 10% for an entire day. Making substantial gains on price change can usually take months.
There was a rumor going around that you could buy shares of one company and then destroy the trucks/planes/assets of their competitor to see your shares gain value. This rumor turned out not to be true. There are a couple lessons here. First, rumors don’t always tend out to be true. Second, as much as you wish you did, you have almost no control over what the stock market does. The only thing you can count on is that the market doesn’t care what you think.
Here is the main part that Grand Theft Auto got wrong: Valuation. Valuation, and the statistics used in valuation, are the most important tools any investor has. Without P/E ratio, dividend yield and history, EPS, and Payout Ratio I would be flying blind and gambling. That’s the most important thing to learn as a novice investor, the difference between investing and gambling. Gambling is when you spend your money in the hopes that luck is in your favor and you make more than you spent. Investing is when you do your homework on a company, and you know that even if the price goes down, you’ll end up ahead on a long enough timeline.
How about you, did you like the stock market in Grand Theft Auto 5?