The goal of the game
Welcome to the Decade of Transformation. While the next decade looks to be more challenging than the last one, investors will still need to balance their short-term needs against their long-term goals. We'd all like to pay our bills in full, retire on time, and grow our wealth as much as possible, but these objectives are often in conflict. With this in mind, we've built this simulation to help you evaluate how to navigate the decade ahead in this game.
How it works
In our simulation, you can choose from four journeys, each of which has a challenge, risk, or opportunity for you to consider: monetary madness, demographic dangers, geopolitical gyrations, and technological transformation.
Once you choose your journey, you start the simulation with USD 5 million. At the beginning of each round (there will be 3), you will be told a little about what the world looks like, and what lies ahead. Using this information— as well as your spending goals, which you can select from a menu of high- and low-priced items—you get to choose your allocation to cash and stocks. Earning a return in your portfolio requires taking risks (e.g. stocks), while making sure you can pay your bills requires limiting your risk (e.g. bonds or cash). To succeed in this game you need to balance these goals, acquiring as much stuff as possible and maximizing your portfolio growth at the same time.
Your score will reflect these dueling objectives. There are a total of 10 stars you can achieve if you play the game perfectly. Here's how the scoring is set up:
- 1 star if you make money in a round based on your investment allocation
- 1 star if you buy one of the lower-priced items (250,000, 500,000, 1,000,000)
- 2 stars if you buy one of the high-priced items (1,500,000, 2,500,000)
Choose your journey
We think the coming decade will be a more challenging one for investors than the past one was. Though such a transformation can be uncomfortable, it will bring opportunities with it too. We've identified four key drivers that will shape the way you invest over the decade ahead. Each one of them will shape the outlook for your returns.
Over the next decade, growth looks to stay muted and the threat of deflation starts to kick in. Central banks have taken note, and have pledged to do whatever it takes to help support the global economy. But will "whatever it takes" really be enough?
After accelerating through the 1990s and the 2000s, globalization peaked in the 2010s. If the world does end up staying this interconnected, any geopolitical event has the potential to ripple across markets. But can you stay invested in that environment?
The advances we've made with modern medicine mean that people are living longer than ever, and more people in high income countries will retire in the next decade than will enter the workforce. Working-age populations will peak in the middle of the decade, which means there will be lower rates of GDP expansion. People will need to work longer to support themselves through retirement, but can they maintain their productivity?
The fourth industrial revolution will lead supply chains to localize. Complex tasks like driving will become automated. Moonshot developments like quantum computing could even redefine the boundaries of what is considered possible. But will we embrace this transformation?
The current situation
A recession appears to be looming, and most of the world's central banks have cut rates preemptively. Whether that's enough to support the economy remains to be seen.
Tensions between major trade blocs are intensifying. The US is seeking to renogotiate relations both with China, the European Union and Japan. Central banks are on the alert for signs that trade uncertainty is harming growth.
Employment opportunities are plentiful. As a result, even older workers have plenty of opportunities. Companies are eager to keep employees working for longer, delaying retirement.
A series of technological advances capture investor attention, across a range of industries from computing to drug development.
Choose your allocation
Things that you're considering
Here's where you stand
The next three years...
The next six years...
The next ten years...
Cash spent: USD 0,000,000
Cash total: USD 0,000,000 +0%
Goals you've achieved in three years
Goals you've achieved in six years
Goals you've achieved in ten years
The initial central bank response encourages markets, lifting equity returns. Falling rates push returns on cash lower.
An initially disappointing response from monetary easing depresses equity markets. Returns from cash also turn negative, but cash does outperform stocks in the short term.
Markets respond to the impovement in confidence among businesses and consumers. Stocks move sharply higher. With rates still close to zero, cash is a drag on portfolios.
Economic growth is robust, which supports stocks. Cash returns lag, but manage to keep pace with inflation.
As the strains of an aging workforce become more apparent central banks cut rates to support growth. Returns on cash decline. But equity markets remain healthy.
Companies struggle to fill job vacancies as populations decline. Rising wages put pressure on corporate profit margins, and equities fall. Central bank rates are cut below zero. But cash still outperforms equities in this period.
After a prolonged period of brinkmanship, new agreements are forged that maintain relatively open trade between the major blocs. Global equities rise sharply. Central bank rates remain low, and cash remains a drag on returns.
International firms are forced to spend heavily to re-order supply chains - dampening profit growth. That hits equity markets while cash holds its value.
Improved trade relations cause equity markets to recover swiftly. Cash rates remain low.
The early promise of a new generation of publicly listed tech firms drives a bull market in equities. Returns on cash lag far behind.
The bursting of a tech bubble leads to a broad bear market in equities. Investor confidence is shaken. Cash holds its value as equities sink.
Several major winners have emerged from the tech renaissance. This helps turn the fortunes of the stock market, leading to a renewed bull market. Cash returns keep pace with inflation but nothing more.
The current situation
Rate cuts initially fail to boost growth. Consumer and business confidence remain weak. Central banks lower rates further, taking them into negative territory.
The lagged effects of rate rises finally start to filter through into the economy. Central banks start raising rates back toward zero.
The decline in the working age population accelerates. But technological improvements are helping to keep productivity growth stable. Policy makers also seek to support growth through expansionary fiscal and monetary policy.
The working age population is now contracting sharply, along with the population overall. Strains are emerging on state pension schemes, and taxes are raised to plug the gap. Many retirees have not saved sufficiently for retirement and so reduce consumption.
Globalization is going into reverse amid heightened brinkmanship between major nations. Talks to resolve the conflicts appear to be going nowhere. Global companies are starting to reorder supply chains to mitigate the risks.
Trade talks have ended up producing a broad agreement on areas of conflict - from subsidies to regional business champions to intellectual property protection and market access.
Several pioneering firms in cutting edge technologies suffer financial setbacks, with market growth slower than expected. Amid excessive borrowing, several prominent firms seek protection from creditors.
The initial promise of leading technologies is finally realized, with several prominent firms growing fast. Regulatory barriers to the adoption of new technologies - from gene editing to autonomous driving - are overcome.
The decade ahead
- 3 Years
- 6 Years
- 10 Years
Congratulations for finishing the game! This simulation helps to teach us about the danger of overreacting to short-term concerns, and also why we're lucky that we have other tools to manage risk than allocating between cash and stocks.
One of the challenges of investing is that we all face a trilemma of conflicting goals: we'd like to pay our bills in full, retire on time, and grow our wealth as much as possible. There's no single investment strategy to meet all of these short- and long-term goals, so we think about balancing risk using our Liquidity. Longevity. Legacy. (3L) framework.
Based on our research, once your upcoming spending needs have been planned for, it pays to stay invested. We believe investors can enhance their investment returns, while limiting risk, by setting aside enough cash to cover three to five years of expenses (the "Liquidity" strategy) and investing the rest of their wealth in well-balanced portfolios with minimal cash allocations. As we discuss in our Bear market guidebook, bonds are a potent tool for managing equity risk, since they typically rise in value when equity markets are falling, and there are other strategies that are more effective and reliable than hoping to time the markets by allocating to cash. For more information, please see How much cash is too much?
Thank you for playing. Have any questions?