For the patient investor, stocks offer potentially enormous
returns.
In 1981, $10,000 invested in the Dow Jones would have grown to
about $150,000 of the same purchasing power today, assuming all
dividends were reinvested.
And had that $10,000 been invested in Microsoft, it would have
skyrocketed to millions of dollars.
So why doesn’t everyone invest in the stock market?
For one thing, huge returns are not guaranteed. Stocks are
volatile ““ they go up and down on a daily basis. Thus,
risk-averse people tend to steer clear of these fluctuating
assets.
Perhaps more crucial to college students, investment requires
postponed consumption ““ nothing now and all later.
For pocket-pinched students, delaying consumption might not be
an option. After all, 15 hamburgers in 20 years don’t help
the currently grumbling stomachs of underfed college students.
Still, there is a minority of UCLA students who are willing and
able to test their skills at playing the stock market.
Some invest their small discretionary incomes, others choose
instead to advise their parents’ stock investments. Still
other students dip into their savings to purchase stocks.
Lorenzo Guidolin, a graduate student in materials science and
engineering and an officer of the Undergraduate Investment Society,
said the thrill of trading stocks and the knowledge gained from the
experience keeps him involved in the stock market, even though he
does not invest large sums of money.
“It is a passion. Nobody tells me to do it. I do it in my
free time,” he said.
While he admits that between work and studies his free time is
limited, he said he makes time to keep up-to-date on stock market
news.
“As much as you read and gain tools to predict the market
and make money, you still don’t have 100 percent
knowledge,” he said.
The unpredictable element of stocks is what has him hooked.
“When you sit in front of a (computer) screen with quotes
streaming live and you need to make a buy or sell decision,
adrenaline runs high and can overwhelm the rational side,”
Guidolin said.
The art is learning to control that adrenaline by sticking to a
pre-formed plan based on careful analysis, he said.
Guidolin described the stock market as having both hope and fear
components, similar to gambling.
“For some people, (trading stocks) can become an
addiction,” he said.
His keen interest, however, stems from a desire to understand
investor psychology as it affects the stock market.
“Also, I want to manage my own money when I am
older,” he added.
Instead of waiting until he is older to have a sizable income to
invest, Paul Nuyugukian, a second-year cybernetics student, started
investing as a freshman in high school by providing stock advice to
his parents.
He found his knowledge of the technology sector gave him a
competitive edge when it came to selecting technology stocks.
In January 2000, he met his first potentially great stock market
success.
Nuyugukian read that Intel had signed a contract to manufacture
computer chips using a type of high performance Random Access
Memory patented by a company called Rambus.
He persuaded his parents to put a substantial sum of money into
Rambus when it was at $71 per share.
Soon after, Dell and Compaq announced that they would use
Rambus’ RAM, and in less than a month, the stock went up by
almost 27 percent, to $91 per share.
Nuyugukian’s parents sold their stock without telling him
and made a handsome profit.
The stock continued to soar, reaching $400 per share within two
and a half weeks.
While they didn’t realize all the gains,
Nuyugukian’s spot-on prediction boosted his parents
confidence in his future stock selections.
It also reeled him in for future stock market activity.
His involvement in the stock market has impacted his world
outlook and, in some respects, changed the way he lives.
“Before, I didn’t care about world events. Then when
I got into the stock market, people (like President of the Federal
Reserve Alan Greenspan) who I couldn’t care less about
suddenly became very important to me,” Nuyugukian said.
Although he does not expect to ever trade stocks as a primary
source of income, it is something he will continue to dabble in, he
said.
While Guidolin and Nuyugukian consider their participation in
the stock market a hobby, for other students the stock market
directly relates to their future career plans.
Upon graduation, Anthony Peña, a fourth-year economics and
Latin American studies student and president of the Undergraduate
Investment Society, wants to go into investment banking.
He hopes to work in the field of company financing, which is
directly related to issuing stocks.
Since high school, Peña has been using his own savings to
invest in the stock market.
“It pays off in the long run,” he said.
Peña estimates he spends 20 to 30 minutes everyday glancing
through Yahoo Finance. He also reads the Wall Street Journal and
keeps up on the nightly news.
Learning through other people who invest is key to gaining
confidence and knowledge of the stock market, he said.
But it is important not to get “too confident,”
Guidolin said, because although an investor can get informed,
market movements can never be determined with accuracy.