- The Washington Times - Wednesday, June 28, 2000

When Josh Shores flipped on the news in September, he saw dollar signs enough to finance his dream trip to Italy, pay off his college loans and maybe even buy the convertible sports car he had been ogling for months.

A few days later, the 19-year-old college student cleared out his $2,000 savings account and spent every penny on tech stocks. One year later, however, his portfolio was worth $1,600. Italy, a debt-free life and his dream car will have to wait.

"It seemed like everybody was making money losing didn't seem possible," Mr. Shores said. "But reality really set in when I started seeing negative numbers. I realized I had a lot to learn."

In this millionaire-a-day age, hordes of younger investors like Josh are logging on and hoping for the cash to stream in, and the tech boom has spurred many to become educated about investing. A new generation of investors is learning to balance risk with restraint and is watching its savvy stock selections skyrocket.

"I'd attribute that to the fact that the market has become something of a pop-culture phenomenon; everybody wants to get a piece of it," said Peter Clark, co-founder and co-director of the Davidson Investment and Finance Club, which has grown from 20 to 45 members since it began in 1998.

College investment clubs are sprouting up on campuses everywhere, and, like the funds they manage, many of their memberships have doubled in size. Statistics from the American Savings Education Council show that while some investment clubs have been around for 10 to 15 years, the trend seems to be growing.

In the wake of the market's most recent fluctuations, many young investors hope to avoid the novice negatives by joining investment clubs sponsored by their universities. In these clubs, investors learn the fundamental principles of investing from faculty advisers and fellow students who already have learned the ropes.

Mustafa Gultekin, faculty adviser for the Undergraduate Investment Club at the University of North Carolina at Chapel Hill, said he tries to promote education.

"We try to educate them in the process of decision-making," he said. "My goal was to set up an institutional framework within which young people could invest rationally."

UNC's club has grown from 40 to 90 members this year, Mr. Gultekin said. "The increase in interest is mainly a result of the spectacular ups and downs in the market."

Mr. Gultekin said he hopes recent losses caused by sharply declining values of some "get rich quick" tech stocks hit home for young investors, making them more cautious. He equated the recent slump to the 1987 crash that served as a warning sign for eager investors in his generation. "They thought they could make easy money," he said.

Mr. Shores, now the marketing chairman for the UIC, said participating in the investment club destroyed his illusions about instantly earning millions in the market. "I've learned that the stock market doesn't mean easy money it takes a lot of research, time and some luck to be successful," he said.

"But, losing a little money now and learning about the market is much better than making the same mistakes when I have a lot more at stake later on," he said.

Ron Anderson, the faculty adviser for the Kogod Investment Group at American University, said easy access to stock information has increased interest in the market and explains why American University's investment club membership also has doubled in the past year.

"Through quick access to information over the Web and television channels dedicated solely to finance, the average American is much more aware of the financial world and the possibilities for gain," he said.

Because the Kogod Investment Group has few restraints about where it can invest money, Mr. Anderson said, the young investors at American University jumped on the tech-stock bandwagon this past year. "Everybody saw the rapidly increasing values of electronic-company stocks and lost perspective that companies' earnings are important to consider when investing," Mr. Anderson said.

"Since the slump, the club's members have become more aware of the fundamentals and have backed off of the tech stocks a little bit."

The Davidson Investment and Finance group manages part of its university's $275 million endowment but just 0.1 percent. Mr. Clark said while students at Davidson suffered losses from taking risks on tech stocks in their personal accounts, the investment club is cautious when deciding how to spend Davidson's money. "It's a lot of money we're not just playing around," he said.

"As a whole they're a lot more conservative than you'd think a group of college students would be," Mr. Clark said.

Focusing on fundamentals and developing sound investment principles is important for young investors, Mr. Anderson said. "The No. 1 objective of the club is to provide an educational experience where members can learn to manage real assets those of other people in a prudent way and to balance risk and return," Mr. Anderson said.

In its 1999 Youth and Money survey, the savings council found that 18 percent of students own a mutual fund. Mr. Blandin said more young people should consider investing. "They have time to ride out the volatility of the stock market and should look at the long-term rewards they will reap from their future stock returns."

Mr. Anderson said because people are uncertain about what the shape of Social Security will be when this generation's 20-somethings reach retirement age, many young people are investing in their futures through stock acquisition.

He said young investors have time on their side, and starting early is the key to accumulating wealth. "It doesn't take a lot of money to become wealthy over time," Mr. Anderson said.

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