As an investor you have heard of the stock market. You know there is a bond market as well, and a commodities market. You may have even heard of the futures market. But did you know about the Political Futures Market? The Iowa Electronic Markets is a platform that allows you to buy and sell “shares” of who you think is going to win the next election. Before you get too excited, there are key points that you should know.
The Iowa Electronic Markets was designed by the University of Iowa to help teach classes about politics. It offers a hands-on tool to students to help them better understand the way politics, and a futures market, work. The IEM deals in real money, where the profits are real and so are the losses. It is not gambling (unless you blindly choose to throw your money at a particular candidate), and it is not investing in the true sense of the word. The best way to go about using the IEM (which is open to anyone in the world willing to open an account) is to view it as it is: a research and teaching tool. You have the possibility to earn some money as you learn, but you can also lose money, especially if you do not do your homework.
The process is fairly straightforward. The user will buy shares in a particular candidate. Each share is worth $1, but will be purchased at a discount. So a share that Mitt Romney will win the election may be purchased at slightly less than a dollar. If he does indeed win the election, the share will be redeemed at full value. If he does not win, it will expire worthless. The more probable that a candidate will win, the closer to par value ($1) the share will sell for. So buying shares in Mitt a year ago (if they were even available) would have resulted in a greater gain to date. The key is to that if you do your research and you understand politics, you can “win.” However, since an account is limited to $500, do not expect to get rich off of political trading.
People love to know that they made the right choice. When they can do some research and learn about their “product” and make a well informed decision, they should be rewarded for the time they spent. Politics are a huge part of living in America and most other countries in the world. Knowing what influences the outcomes of the political races, and being able to accurately “predict” them will help a person to better understand the world around him. If you have some money to spare, and want to learn more about politics and be rewarded for your research, head over to the Iowa Electronic Markets and learn more about how you can open an account. Personally, I have not done any political investing, but if you do take the plunge, leave a comment and let everyone know how it goes.