Class gets cash YSU students to buy stocks

With real cash, students will learn how emotions affect investments.

By DON SHILLING

VINDICATOR BUSINESS EDITOR

YOUNGSTOWN — A class of business students at Youngstown State University is being given $250,000 to invest in stocks and bonds.

“This is real money,” said Thomas Cavalier, chairman of the YSU Foundation. “It’s not a hypothetical portfolio.”

The foundation, which has $170 million in assets, is turning over part of its holdings to the students as an educational experience. The foundation uses earnings on its investments to fund scholarships worth about $5 million a year.

A new course is being created next semester, and enrolled students will analyze investment options and decide where to place the $250,000.

Peter Chen, assistant professor or accounting and finance, said working with the foundation’s money will be more realistic than a typical classroom experience of using simulated portfolios.

Price swings in investments affect investors much more dramatically when actual cash is involved, he said.

“To manage real money, you have to manage your emotions,” he said.

Betty Jo Licata, dean of the business school, said she thinks less than half of the accredited business schools in the nation have programs that allow students to manage real assets. She said $250,000 was a good amount because it is significant enough that students will feel their decisions are meaningful.

Besides, the plan is for the amount to grow.

Dividends from stocks and interest paid on other investments are to be sent to the foundation’s scholarship programs, but any appreciation on investments is to be kept in the fund.

Investments will be made as part of the course, called Practicum in Porfolio Management. It will be taught by Chen, 33, who has been teaching at YSU for four years.

Students will have the final decision on investments but will be guided as part of the course, Chen said.

He said he will encourage students to select value stocks, which are those that are thought to have been overlooked by the market. The course isn’t about finding small companies that are expected to grow rapidly.

“We’re not looking for something hot. We’ll probably be looking for something cold. That provides the greatest value,” he said.

Investments will be selected based on how they are expected to perform over three to five years, he said.

Cavalier said the students will be advised to follow the same conservative strategy that’s used by the foundation — trying to beat the market averages by a little bit each year.

“If the market goes up 10 percent and you are up 25 percent, that’s not good. That means you were too risky,” said Cavalier, who is president of Butler Wick Corp., a Youngstown-based stock brokerage.

The foundation’s investments returned 18 percent last year and have averaged 10 percent over the last 10 years, said Reid Schmutz, foundation president.

Chen added, however, that the course is primarily an educational experience. “Even if the students make mistakes, they’ve learned something,” he said.

shilling@vindy.com