Market devastation or market opportunity?
By Jonas Pauliukonis
Does anyone remember what the stock market and economy were like just four months ago?
It's hard to believe that such dramatic changes have occurred in so little time.
Gas was much more expensive -- nearly five dollars for unleaded -- but at least high gas prices were a constant we grew to expect. Now there is almost no way to know what will happen on Wall Street from one day to the next.
From natural disasters like Hurricanes Gustav and Ike to the crises in the mortgage and banking industries, economists and investors alike are unsure what turn the market will take next.
Whether this economic collapse is due to long-standing issues involving quasi-governmental institutions and irrational legislation, the realization of some self-fulfilling prophecy or a combination of the two is truly beside the point. The fact is that Americans -- investors and families alike -- are being hit hard financially.
Should the U.S. emerge from this financial crisis, we may be facing an even greater opportunity for growth. In fact, one of the key tenets of investing is to buy stock at a low price so that it can then be sold when the price rises.
Santa Clara has a course dedicated to learning about investment. Finance 163: investment practice, is open to finance majors who want to get hands-on experience investing in options, stocks, bonds and futures.
The class works with roughly $250,000 from the university endowment fund and business school budget. The students are not only taught by professors Steven Wade and Tony Nguyen, but they are also coached by a broker.
"I think it is a good time to invest, except in the financial and mortgage sectors," said Chris Binder, a student in the class. Professor Steven Wade, the course instructor, agreed, adding that the best investment is one that is long term, with 10-11 percent average annual returns. Wade said, "The best investment for long run returns is a low fee, broad based index fund."
When asked about the $700 billion government bailout, Binder added, "Some companies have been undervalued -- such as GE and Citigroup -- far more than they should have been."
Here are three guidelines for beginners investing in the market:
1. Open an account: You might be familiar with Fidelity, Scottrade or TD Ameritrade. Visit their Web sites, compare their trading fees, options and research tools. You will most likely be interacting with the company solely through its Web site, so make sure you're comfortable with its layout and tools.
2. Research the market: There is no one way to do this. Some people pick out a couple of their favorite brands, some seek advice from market analysts and others look to Fortune 500 or other companies with strong ethical reputations. Whatever the case, be sure to look at past performance. Ask about what sort of competition exists in the industry. Ask if the company has experienced growth.
3. Pay attention to the news: It's easy to pick out stocks, but to be a savvy investor, keep track of the companies in which you hold ownership. If you start investing, you will notice that even small pieces of news can greatly influence a stock's price.
Binder offered the following advice to students who are thinking about investing: "Things will probably get worse before they get better, but as long as they have a bit of money lying around and are looking at (the market) as a long-term investment, it might be good in the long run."
When investing, remember that people usually don't make millions overnight.
It takes research, patience and good luck to turn a profit. While instability in the market might cause fluctuations in the near future, if you are looking to profit down the line, consider looking at the market now for advice.
Contact Jonas Pauliukonis at jpauliukonis@scu.edu.