Student Class Invests $500,000 in Stock Market
The Student Managed Fund has outperformed the benchmark and teaches students about the real world of investing
Imagine a class where students are in charge of investing a half million dollars in the stock market. That's exactly what's happening at Roanoke College in a course titled the Student Managed Fund.
Headed by Dr. Larry Lynch, the class was formed in January of 2004. The idea for the class was conceived by a student doing an independent study project, which is when a student individually works on a project in their field of study with the guidance of an instructor. With the help of Mark Gobble '87, a financial advisor with Merrill Lynch, the parameters for the class were set up and presented to the Roanoke Board of Trustees for approval.
Lynch says students want to do real investing in portfolios rather than the hypothetical investing that was the norm. "We decided that using real money was better than 'fake investing' because it really gives the students a true sense of gains or losses," Lynch said.
"In hypothetical investing, students would take outrageous risks without having to worry about the consequences of losses, but with real money at stake, students seem to care much more about portfolio performance and really want to make sure they have solid research to back up their decisions," Lynch said.
While Lynch is the professor in charge, the class is run by the students. Lynch makes sure that the class follows the guidelines set up by the Board of Trustees, takes attendance, and also lectures occasionally when he feels that there is an opportunity to teach the students a concept they may not understand. Dr. Stauffer, professor in the business department who had substituted for Lynch while on sabbatical said, "I did not consider myself the teacher of the class. If anything, I learned more from the students than they learned from me."
The students actually decide the structure of how the class is set up. Currently it is set up with a main manager, elected by the students, in charge of the fund, and then one person in charge of each of nine industry sectors.
"The most important aspects of this class are that it teaches students how to take responsibility for investment decisions, analyze stocks, and learn how to use online stock market information," Stauffer said.
Keith Petrus '06, former manager of the fund says, "The Student Managed Fund is a great addition to the business department. Many colleges and universities have something similar in the form of a "mock" portfolio, but Roanoke College is unique in that we are using real money."
Petrus believes the class provided him with invaluable learning experiences that have already begun to help him. "I discovered that I spent nearly half of my interviews with employers discussing the dynamics of the student managed fund. It is truly a unique class, and it gives you a great perspective on asset allocation, diversification, time-value appreciation of money, and the different methods of becoming a successful investor.
After graduation I will be working in the world of financial services and the student managed fund has enabled me to better grasp the different aspects of wealth management," says Petrus.
"I believe that real-world applications are essential to the business and economic curriculum at Roanoke College, and this class definitely provides that," says Stauffer.
The financial returns benchmarks for the students are the S&P 500 and the Lehman Brothers Bond index. So far the students' fund has beaten the benchmarks consistently. The fund has a current return of 14.78 percent or about $70,000. The real return is currently at $38,000 after fees that must be paid to the College for operating funds and fees paid to Merrill Lynch.
"I am very pleased with the performance of the fund," Lynch said. "The students have outperformed the benchmark, but more importantly, they are learning about the real world of investing."