SOUTHEAST TRADERS TURN PROFIT: STUDENTS DO REAL-LIFE MARKET STUDY

CAPE GIRARDEAU -- Student traders at Southeast Missouri State University liquidated most of their investment portfolio in response to a volatile stock market, which hit an all-time high earlier this month.

Now the students are watching money markets and stocks closely to decide their next financial move.

Students enrolled in Portfolio Theory class manage an investment portfolio currently valued at $17,000.

Southeast is one of only 21 institutions in the nation with a real-money portfolio managed by students.

"Using a real-money portfolio is a different learning experience," said William Walker, who teaches the course. "Having the money gives them more incentive to track the market and their performance."

Financial decisions made by students have proved profitable. Walker said the average annual rate of return is now about 6 percent. The profit could be much higher for the semester, thanks to the timely sellout.

As part of the real-world experience the course is based on, students are leaving Thursday to visit the Chicago Board of Trade and the Chicago Mercantile Exchange.

The program also includes opportunities for students to visit Wall Street.

The program began at Southeast in 1988 with a $14,000 grant. Margaret Woods Allen of Sikeston has been a major benefactor of the finance program. In addition to a $10,000 gift to help start the portfolio, Allen has given money to help fund the student trips.

Walker said he feels confident turning over control of the investments to his students each semester.

"Once I lay it out that the future of this course is in their hands, the students get so conservative it's a major push to get them to make a decision," he said.

Walker reserves ultimate veto power, but has never exercised it. "I would only veto something I believed would be absolutely catastrophic," he said. "Beyond that, I let them make their own decisions."

Students make decisions about what to buy and sell and when to make their financial moves.

Meng Jin Pu, a finance student from Malaysia, said: "We are given a chance to do our own individual research and then recommend to the class if we think a certain company would be a good investment."

The whole class must approve each purchase or sale.

Pu said the class last semester bought stock in the Wal-Mart company, for example. "It was showing good financial strength. The stock had split in August and it was predicted to increase."

The class this semester decided to sell the Wal-Mart shares.

Neil Miles of Advance said, "We had a gain at the time we sold in March."

Greg Essner of Cape Girardeau said, "We were looking for the market to turn down."

The class bought the stock at $25 a share and sold it for $36 a share. Although the stock trades at a higher dollar value now, the students were pleased with the profit.

"Capital preservation is the main thing," said Brad Cummins of New Athens, Ill.

If students would lose all the portfolio's money, the real-money experience would not be available for the next class.

Students closely monitor the market and news that affects it through a satellite-computer link with the major trading centers.

The satellite information company, Data Transmission Network, is also used by brokers across the country. The university gets a reduced rate for the service by agreeing to a 15-minute delay in receiving information.

Miles explained that the portfolio is primarily in money markets now, which he said have a lower rate of return but are safer than company stocks.

"We do have a utility, which is paying a high dividend, and utilities are pretty conservative," Miles said. "We also have another thing, which is practically worthless. In January, its price was about 25 cents a share. If we sold that, we would take a loss and not get any money out of it."

Andy Johnson of St. Charles said, "We expect the market to go down."

Walker said the class forces students to predict what will happen, act on those convictions, and then watch to see if their predictions come true.

Pu said, "It makes us really want to check out companies and their performance."

Johnson said, "When you decide to buy or sell, it's a lot harder with real money."

Plus, Cummins said, "We get caught up in the real market emotion. It's easy to say I would have done this or I'd do that when you don't have any money involved. With this portfolio, we actually make decisions and do it."

Walker said, "They have an opportunity to see that you can do all the analysis in the world but finally you have to make a decision, and then, win or lose, they have to live with that decision."