2008 Woodie Awards
Welcome to Wall Street
The importance of an economic understanding for the not-so financially savvy college student
Mary-Marshall Gallant
Issue date: 4/1/08 Section: Features
Graduation Day is on the horizon … and with any luck, that first paycheck soon after. With talk of an economic recession circulating in the media, a fragile U.S. economy is bad news for any college student entering the world of work.
For many college students, knowledge of financial terminology doesn't extend much farther than debit cards and ATM machines. Sophomores Jessica Forsythe and Christa Fetzer admitted they fall into the category of students without a thorough understanding of the financial world. Forsythe, who is studying architecture, and Fetzer, an early education major, had wide eyes when asked about the stock market and hesitated to explain their knowledge of investing.
However, Forsythe said she recognized how an understanding of the financial world could be a benefit in her future.
"Even though I don't know much about financing, I know it's important no matter what you do," Forsythe said. "You will always be dealing with money all your life."
First-year Abbey Custer, who said she grew up listening to her father talk about the stock market, echoed Forsythe's thoughts.
"It wasn't until Business 101 that I realized the massive role the stock market plays in the economy," Custer said. "It amazes me how much I never had understood the concept of the stock market and how it relates to so many different topics."
With the constant fluctuation of international currency rates and the announcement in mid-March by the Federal Reserve that it would lend $200 billion to financial institutions across the country to address a credit crisis, financial markets can be extremely erratic.
Despite the instability of the market, it's true-the financial world has an inevitable influence on daily life.
Buy Low, Sell High
When it comes to investing money, recognizing shifts in the economy is the first step an individual should take since different economic conditions call for different approaches of saving.
Terry Nixon, associate professor of finance, teaches his students the principles they need to make informed decisions when discovering ways to invest.
"Remember that there is a bit of Las Vegas in the stock market as you're always gambling to some extent," Nixon said. "Sure things don't exist."
While investing may be a risk, junior Matt Sheskey said he has seen the rewards that come with investing. Sheskey owns shares of Dell, Apple, Research in Motion and Amazon.com stock.
To Sheskey, investing is a current hobby and a possible future career.
"I want to make a career out of wealth management," Sheskey said. "I'm gaining experience by buying and selling stock. It will help me to know what is going on in the market. It gives me talking points. It is kind of like a litmus test for whether I want to do that job professionally."
Professional or not, Nixon said the beauty of investing is that anyone can do it, however he said that it is smart for beginning investors to invest in a company with common
stock. Each share of common stock purchased represents a fractional ownership in that company. Shareholders gain the right to help elect a board of directors and make decisions on mergers and payment of dividends among other tasks.
Stock trades are listed in exchanges such as the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX). Headquartered in the financial district of New York City, trading takes place in the trading pits where buyers and sellers cross paths to come to agreement on a price.
Unlike the NYSE and the AMEX, where stocks are traded in pits, the NASDAQ offers online trading. According to the NASDAQ corporate Web site, it is the largest electronic stock market with approximately 3,200 companies traded.
When it comes to buying and selling stocks, Nixon said the universal goal is to buy stock when prices are low and sell them back when prices are high.
Yet with an unreliable market, Nixon said knowing when to buy and sell is a tricky process.
According to Nixon, stock markets experience changes rapidly, which is why most experts advise that investors stay in the market for longer periods of time.
"I'm a patient investor and the best part of investing to me is seeing the impact of investing for five to 10 years," Nixon said.
Sometimes patience, however, isn't always enough. Nixon said being informed involves knowing the amount of risk one is willing to take, based on experience and knowledge of an industry.
To Nixon, one of the most common mistakes for investors is to prematurely jump out of the market at the onset of the slightest downturn. Timing is key, he said.
"Many individuals think they can 'time' the market," Nixon said. "This involves constantly trading stocks, always trying to buy low and sell high. However, some studies I've seen suggest that there may be as few as two days a year where individuals make their highest rate of return in the stock market. If you're timing the market and miss those couple days, you can seriously hurt your returns."
Forecasting Future Finances
Despite reports of a struggling economy, college students can maximize future financial potential by putting to use knowledge of investment and the world market.
For junior Jon Sisk, an economics major, uncertainty of the finance world is an incentive to work harder.
"There's a hint of relief when you realize that you can't do anything to change the market," Sisk said. "All you can control is what's happening now at school. The job market won't stay bad. This is not a situation where the skills you're learning are now and forever inadequate."
Economics professor Michael Marron said students should not panic at the current less-than-stellar economic forecast.
"The market will correct itself," Marron said. "But no one really knows how long it will take."
Despite the proposed benefits of investing in the stock market, some students like Custer are apprehensive
"I always hear that you need to keep your money in the market for a long time for it to make a difference," Custer said. "I'm afraid something will happen and I'll need that money and then I won't have it because it is tied up or worth next to nothing."
Custer said she believes college students don't have the money to make risky investments.
"The process of deciding what to do with money you save seems so time consuming," Custer said. "A lot of students, like me, just don't have time to work and go to classes. So, the money they have is already tight, which makes saving difficult."
Miami 2003 alumna Nicole McLarnan knows from experience that even the smallest investments can provide experience, if not financial rewards.
"I would suggest college students stay informed about the economic world, even if just a basic understanding," McLarnan said. "Before you know it, you will be part of the workforce and financial matters will be part of life."
Hoping for future jobs outside the business world, both Forsythe and Fetzer said they would make an effort to learn more about the financial world and intend to make investments for the future.
To Nixon, smart investments can pave the way for success.
"If you invest wisely over time, history would tell us that the stock market is the place to be," Nixon said.
It's Your Economy, Too
Understanding the economy is not just for older generations and number crunchers. As college students like Sisk enter the job market, a basic familiarity with the world of finance should come in handy.
McLarnan never thought that her primitive knowledge of the stock market would come in handy after graduation. A speech communication major, McLarnan now works for the corporate headquarters of T&C Federal Credit Union in Bloomfield Hills, Mich., as a marketing specialist. Finance lingo is now a second language to McLarnan.
"I never saw myself with a job that related to the financial world," McLarnan said. "Now, I'm glad I had at least some knowledge of investing and stocks, even if it was only Disney stock or Coca-Cola."
McLarnan said she originally planned to enter the public relations field, but the limited job market forced her to reconsider other options, like working for the credit union.
For students like Sisk who are looking to enter the job market, specific knowledge of a field or a degree in specific fields could prove to be very useful. A Sloan Work and Family Research Network study at Boston College, found that baby boomers are retiring and jobs in the industries of health and social care, education and manufacturing will soon be in high demand.
For graduates, the overall picture may not be as bleak as some would imagine. In 2007 the Collegiate Employment Research Institute at Michigan State University additionally stated the number of positions available for college graduates entering the work force will be seven percent higher than in 2007. The same research showed that this trend would increase the amount of jobs in the transportation, education and accounting industries.
Custer said the economy at the time of her graduation will have a great impact on her decisions.
"(The economy) affects the choices I will make with money and probably even what career I choose," Custer said. "Knowing that I'm taking the steps to support myself in a few years makes me more interested in the economy. because I know it's my responsibility."
For many college students, knowledge of financial terminology doesn't extend much farther than debit cards and ATM machines. Sophomores Jessica Forsythe and Christa Fetzer admitted they fall into the category of students without a thorough understanding of the financial world. Forsythe, who is studying architecture, and Fetzer, an early education major, had wide eyes when asked about the stock market and hesitated to explain their knowledge of investing.
However, Forsythe said she recognized how an understanding of the financial world could be a benefit in her future.
"Even though I don't know much about financing, I know it's important no matter what you do," Forsythe said. "You will always be dealing with money all your life."
First-year Abbey Custer, who said she grew up listening to her father talk about the stock market, echoed Forsythe's thoughts.
"It wasn't until Business 101 that I realized the massive role the stock market plays in the economy," Custer said. "It amazes me how much I never had understood the concept of the stock market and how it relates to so many different topics."
With the constant fluctuation of international currency rates and the announcement in mid-March by the Federal Reserve that it would lend $200 billion to financial institutions across the country to address a credit crisis, financial markets can be extremely erratic.
Despite the instability of the market, it's true-the financial world has an inevitable influence on daily life.
Buy Low, Sell High
When it comes to investing money, recognizing shifts in the economy is the first step an individual should take since different economic conditions call for different approaches of saving.
Terry Nixon, associate professor of finance, teaches his students the principles they need to make informed decisions when discovering ways to invest.
"Remember that there is a bit of Las Vegas in the stock market as you're always gambling to some extent," Nixon said. "Sure things don't exist."
While investing may be a risk, junior Matt Sheskey said he has seen the rewards that come with investing. Sheskey owns shares of Dell, Apple, Research in Motion and Amazon.com stock.
To Sheskey, investing is a current hobby and a possible future career.
"I want to make a career out of wealth management," Sheskey said. "I'm gaining experience by buying and selling stock. It will help me to know what is going on in the market. It gives me talking points. It is kind of like a litmus test for whether I want to do that job professionally."
Professional or not, Nixon said the beauty of investing is that anyone can do it, however he said that it is smart for beginning investors to invest in a company with common
stock. Each share of common stock purchased represents a fractional ownership in that company. Shareholders gain the right to help elect a board of directors and make decisions on mergers and payment of dividends among other tasks.
Stock trades are listed in exchanges such as the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX). Headquartered in the financial district of New York City, trading takes place in the trading pits where buyers and sellers cross paths to come to agreement on a price.
Unlike the NYSE and the AMEX, where stocks are traded in pits, the NASDAQ offers online trading. According to the NASDAQ corporate Web site, it is the largest electronic stock market with approximately 3,200 companies traded.
When it comes to buying and selling stocks, Nixon said the universal goal is to buy stock when prices are low and sell them back when prices are high.
Yet with an unreliable market, Nixon said knowing when to buy and sell is a tricky process.
According to Nixon, stock markets experience changes rapidly, which is why most experts advise that investors stay in the market for longer periods of time.
"I'm a patient investor and the best part of investing to me is seeing the impact of investing for five to 10 years," Nixon said.
Sometimes patience, however, isn't always enough. Nixon said being informed involves knowing the amount of risk one is willing to take, based on experience and knowledge of an industry.
To Nixon, one of the most common mistakes for investors is to prematurely jump out of the market at the onset of the slightest downturn. Timing is key, he said.
"Many individuals think they can 'time' the market," Nixon said. "This involves constantly trading stocks, always trying to buy low and sell high. However, some studies I've seen suggest that there may be as few as two days a year where individuals make their highest rate of return in the stock market. If you're timing the market and miss those couple days, you can seriously hurt your returns."
Forecasting Future Finances
Despite reports of a struggling economy, college students can maximize future financial potential by putting to use knowledge of investment and the world market.
For junior Jon Sisk, an economics major, uncertainty of the finance world is an incentive to work harder.
"There's a hint of relief when you realize that you can't do anything to change the market," Sisk said. "All you can control is what's happening now at school. The job market won't stay bad. This is not a situation where the skills you're learning are now and forever inadequate."
Economics professor Michael Marron said students should not panic at the current less-than-stellar economic forecast.
"The market will correct itself," Marron said. "But no one really knows how long it will take."
Despite the proposed benefits of investing in the stock market, some students like Custer are apprehensive
"I always hear that you need to keep your money in the market for a long time for it to make a difference," Custer said. "I'm afraid something will happen and I'll need that money and then I won't have it because it is tied up or worth next to nothing."
Custer said she believes college students don't have the money to make risky investments.
"The process of deciding what to do with money you save seems so time consuming," Custer said. "A lot of students, like me, just don't have time to work and go to classes. So, the money they have is already tight, which makes saving difficult."
Miami 2003 alumna Nicole McLarnan knows from experience that even the smallest investments can provide experience, if not financial rewards.
"I would suggest college students stay informed about the economic world, even if just a basic understanding," McLarnan said. "Before you know it, you will be part of the workforce and financial matters will be part of life."
Hoping for future jobs outside the business world, both Forsythe and Fetzer said they would make an effort to learn more about the financial world and intend to make investments for the future.
To Nixon, smart investments can pave the way for success.
"If you invest wisely over time, history would tell us that the stock market is the place to be," Nixon said.
It's Your Economy, Too
Understanding the economy is not just for older generations and number crunchers. As college students like Sisk enter the job market, a basic familiarity with the world of finance should come in handy.
McLarnan never thought that her primitive knowledge of the stock market would come in handy after graduation. A speech communication major, McLarnan now works for the corporate headquarters of T&C Federal Credit Union in Bloomfield Hills, Mich., as a marketing specialist. Finance lingo is now a second language to McLarnan.
"I never saw myself with a job that related to the financial world," McLarnan said. "Now, I'm glad I had at least some knowledge of investing and stocks, even if it was only Disney stock or Coca-Cola."
McLarnan said she originally planned to enter the public relations field, but the limited job market forced her to reconsider other options, like working for the credit union.
For students like Sisk who are looking to enter the job market, specific knowledge of a field or a degree in specific fields could prove to be very useful. A Sloan Work and Family Research Network study at Boston College, found that baby boomers are retiring and jobs in the industries of health and social care, education and manufacturing will soon be in high demand.
For graduates, the overall picture may not be as bleak as some would imagine. In 2007 the Collegiate Employment Research Institute at Michigan State University additionally stated the number of positions available for college graduates entering the work force will be seven percent higher than in 2007. The same research showed that this trend would increase the amount of jobs in the transportation, education and accounting industries.
Custer said the economy at the time of her graduation will have a great impact on her decisions.
"(The economy) affects the choices I will make with money and probably even what career I choose," Custer said. "Knowing that I'm taking the steps to support myself in a few years makes me more interested in the economy. because I know it's my responsibility."
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