It seems like a great way to make a quick buck ...
Unfortunately, it's not. Gains from stock holdings in publicly traded companies tend to be incremental. Rapid gains are unusual, even in boom times. What attracted so many 'ordinary' folks to the market in the 1920s was its apparent stability. After four 'panics' in 14 years, ending with the Panic of 1907, the stock market had been fairly predictable (overall) for an extended time. Many stocks paid regular annual dividends, usually a few dollars per share.
However, large rapid gains that provide 'quick bucks' mostly went to those with inside information. Usually, this is done by selling short, that is, making an agreement to sell someone securities (stocks) that you don't own, with the intention of subsequently 'covering' (purchasing) them at a lower price. In the event of an interim price decline, the short seller will profit, since the cost of repurchase will be less than the proceeds received upon the initial (short) sale. Someone who knows in advance that a company is going to announce very bad news can make a lot of money in a hurry. They can also get out of an exposed position by selling at a price that will be gone tomorrow.
Such 'insider trading' wasn't illegal in the US until after the 1929 crash when the newly-formed Securities Exchange Commission adopted regulations making such activities illegal. Joseph P. Kennedy, a well-known short-seller was the first chairman of the SEC. Such activities were the real foundation of the Kennedy fortune, not bootlegging.
The other thing that made the stock market attractive to middle-class people wa the fact that brokers were willing to extend the privilege of buying 'on the margin': buying securities with cash borrowed from the broker, sometimes using the securities themselves as collateral. (Not unlike a home mortgage or a car loan).
In the 1920s, margin requirements were very loose. Brokers required investors to put in very little of their own money, allowing leverage rates of up to 90 percent debt. When the stock market started to contract, many individuals received margin calls, requiring that they give more money to their brokers or their shares would be sold. Since many couldn’t cover their margin positions, their shares were sold, causing further market declines and further margin calls. This was one of the major contributing factors which led to the Stock Market Crash of 1929. Note that the investor still owed the broker the balance of the debt.
There was also a lot of fraud during the 1920s. Once people got the idea that stocks were guaranteed to increase in value, crooks and con men sold a lot of fake or 'watered' stock. That's why people pay brokers' fees, though sometimes even brokers get fooled.
So, as many real people found out in 1929 (and any number of times before and since), while stocks can be a good investment over the long run, they can be very volatile in the short term. And all that money your portfolio was worth, that made you feel (and act) rich, that you used as security for other purchases, just evaporates.
If you do choose to let your PCs play the market, I recommend that you advance the date of the Great Crash to March 25, 1929, when an historical 'mini-crash' occurred.
Oh, the Horror.
[Most information in this post was obtained from Wikipedia.]
Edited by Gaffer, 16 October 2013 - 02:29 PM.