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3 Things Animal Crossing Can Teach You About Investing

We played the Stalk Market and we don’t think we’ll ever look at turnips the same way again.

Articles by Demitri Anastasiadis
By Demitri Anastasiadis Training and Content Specialist, Betterment Published May. 11, 2020
Published May. 11, 2020
4 min read

Animal Crossing: New Horizons for Nintendo Switch has been all the buzz for gamers since its release on March 20, 2020. In this videogame, you arrive on a deserted island and it’s your responsibility to build a thriving community. To advance, you’ll need to acquire Bells, which are the currency of this make-believe world. By spending Bells, you build infrastructure, expand your home, and widen your wardrobe. Gameplay is akin to living a regular life—only much cuter.

If you want to earn big Bells, you’ll need to begin investing, similar to how you would in the real world. However, investing in Animal Crossing is a bit different than the type of investing we’re used to. In the game, you invest in the Stalk Market using turnips. You can buy turnips from Daisy Mae on Sundays, before noon, then sell these anytime Monday through Saturday. The value of turnips changes twice daily, at midnight and noon. Turnips spoil after one week, after which they have zero chance of bringing you any earnings.

Screenshot from Animal Crossing video game showing Daisy Mae selling you turnips for bells.

Source: In-game screenshot for Animal Crossing: New Horizons on the Nintendo Switch.

Good investor behavior in the game does not equate to good investor behavior in your Betterment portfolio. Despite this, investing in the Stalk Market can teach us real-world lessons for investing in the actual stock market.

There are 3 main lessons the Stalk Market can teach us about the stock market.

1. Investing for the short-term is risky.

Let’s say you buy turnips for 100 Bells. Later in the week you may see the valuation change to 150 Bells. In the real world, a 50% increase over a matter of days would be incredible, but you see posts on social media where people are bragging about valuations of over 500 Bells, so you hold on to them. As the week goes on you see the valuation drop. Saturday comes along and the turnips you bought for 100 Bells are now worth 90. Your only choice now is to sell your turnips at a loss before they spoil and become worthless.

In your real-life investment portfolio, you’ll likely see a loss in your portfolio at some point in time. Luckily, you can continue holding the assets. Short-term losses are to be expected in both investment systems; however, you have the luxury of being able to hold your assets for longer, giving you more time and opportunity to build earnings. The IRS even incentivizes investors to hold on to investments for the long-term by offering lower tax rates for assets held for longer than one year.

2. Monitoring your portfolio performance can be stressful.

It’s a good strategy to monitor the value of turnips closely throughout the week. You wouldn’t want to miss an opportunity to sell turnips for 550 Bells simply because you neglected to check their value. It’s common to feel uncertainty as to whether or not it’s the right time to sell, or regret for not selling earlier or for not holding out longer. These emotions could feel stressful for any gamer.

Monitoring your real-life investments closely is even more stressful, because it has real-world consequences. Close performance monitoring often leads to emotional and reactionary behavior that investors later regret. For this reason, it is not advised to monitor your real investment portfolio too frequently.

3. Diversification is important!

Unlike the Betterment Portfolio, your Animal Crossing “portfolio” lacks diversification; after all, your only assets are turnips! When the value of turnips decreases, the value of your entire portfolio decreases since you do not have other assets to help offset this loss. If only you could buy celery stalks as well—that way, you wouldn’t have to put all your eggs in the turnip basket.

In attempts to subvert this lack of diversification, many players will venture off to other islands in hopes of finding a better turnip valuation. It’s commonplace to invite friends to your island when the turnip valuation is high, so they can sell on your island and reap the benefits. You can even open your island to strangers on Reddit, and who knows, maybe Elijah Wood will pay you a visit.

Screenshot from Animal Crossing video game showing you surrounded by turnips.

Source: In-game screenshot for Animal Crossing: New Horizons on the Nintendo Switch.

It’s important to remind yourself that investing in the Stalk Market is all fun and games—but investing in the stock market is not. If you feel the urge to chase short-term returns, we encourage you to satisfy this need in Animal Crossing, where the consequences of loss are a lot less serious.

Or, maybe you tend to check your portfolio performance frequently. We hope that the next time you have an urge to check performance, you’ll check the price of turnips on your island instead.

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