MONEY. Who would have thought that a simple five letter word could become so important? It is the source of complaints, excitement, frustration and most every other emotion a college student feels. Considering its possibilities, it's no wonder that money is so sought after. But the real question is how to get it.
You could wait tables at College Inn -- too tiring. You could swipe cards at the AFC -- you'd see way too many familiar faces. Get a real job -- No way! Sit at home and trade stocks from your own computer? Perfect.
The newest fad among University students seems to be managing one's portfolio and raking in the big bucks doing absolutely nothing strenuous.
Second-year College student Jacob Best has been trading stocks since his high school graduation. After playing apprentice to his father, he started with his own money and invested in stocks such as Omnicare, Dodge and Cox, Aaipharma and the Nasdaq. He currently holds stock in Omnicare, a medical company, and Dodge and Cox, a mutual fund.
Best works with McDonald Investments, which is based in Cleveland. He chooses the industry and his stockbroker researches the specified market. After being sent annual financial reports and an evaluation of the stock, Best makes a decision as to whether or not he should buy.
Best began his venture into the stock market by starting an account with no annual fee that penalized the customer with a charge for each trade. Now that he is trading more often, Best has changed to an account where he is charged one annual fee regardless of the number of trades.
In a market where 10 percent per year is considered a good return, Best has achieved a return of approximately 42 percent in three years.
"I invested right around the start of the current economic recovery," Best said. "And I've been in at a good time. Most of my portfolio is long-term investments which I don't plan on touching for at least 20 years."
Another approach is free trading without a broker. By avoiding a middleman, you may save money and increase your chances of winning big.
Second-year College student, Christoph Mlinarchik began trading with the online trading firm, Ameritrade, in June 2003. Using money from savings and inheritance, Mlinarchik has achieved a 17 percent gain over approximately seven months.
Mlinarchik opted to invest in companies that were leaders in their respective industries, such as Dell, Microsoft, Pfizer and Ebay. He chose to trade with an online firm because of the lower commission charged for each transaction. With no broker, however, Mlinarchik was forced to figure out the market on his own.
On his own initiative, he used a mix of knowledge gained from reading books, intuition and quantitative analysis to decide on stock picks. However, "I don't think reading one book helps," he said. "Each book highlights the theories of one author. You must read many books to understand the market completely."
Mlinarchik was adamant about the benefits of trading without a broker. "It is important to be your own broker because a private broker's incentive would be to make you trade frequently since they make a certain percentage in commission," he said. "Your incentive is to make money and minimize the amount you pay in commissions so there is a direct clash."
Another student who wandered into the stock market solo, second-year Engineering student Willow Noonan, started when he was just a sophomore in high school. With the advice of his parents, who both call trading their "hobby," Noonan bought stock in the packaging company Crown, Cork & Seal and a variety of mutual funds.
"I started to read short articles about investing in general and making smart business decisions," he said. "At first, all investing was to me was buying a stock in a company that had potential to make money in the long term relative to other types of trade. I did not buy with the intention of trading."
After about a year of watching his portfolio, Noonan decided to become more actively involved.
By summer 2002, Noonan began researching "Candlesticks" and the Elliot wave theory, popular philosophies regarding market movement. Noonan said that brokers in general do not follow these theories and tend to stay away from market timing and predicting.
Rather, he said most brokers support the random walk hypothesis, which claims future market behavior cannot be predicted based on past or present market behavior. This tends to keep clients feeling secure about leaving their money in the hands of others.
However, Noonan noted that his father, a former lawyer who is now a private investor, uses market timing on his own money and is aware of many brokers who do the same.
At this time, Noonan made the decision to stick to mutual funds because they tend to follow market indicators such as the Dow and Russell 2000 closely. Thus they were easier to predict. He uses indicators such as moving averages (the average stock price over a given time) and the MACD (moving average convergence divergence), which indicates trend reversals. Since 1996, Noonan has made an approximate 56 percent profit.
While some students prefer working with their own money, others seem more comfortable playing the market without risking personal losses. The McIntire Investment Institute, a student run organization, works with 100 students and an endowment established by John Griffin, a McIntire graduate, who is currently at the helm of Blue Ridge Capital, a hedge fund. The endowment of $250,000 in 1994 has grown to nearly $350,000.
Students meet weekly for an hour to listen to presentations on trading fundamentals, such as current theories, or specific stocks. These presentations are done voluntarily by whoever is interested.
The Institute's fund managers then make final decisions to buy or sell the organization's stock and are also required to do a certain amount of presentations per semester.
Through MII, students never risk losing their own money and yet still get to learn about the market.
Regardless of how you trade, the stock market can be a thrilling place.
"It is the paramount investment opportunity for Americans," Mlinarchik said.
Just make sure you know what you're doing before you quit your day job!
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