Selected business majors at Cal State Long Beach get to invest up to $50,000 in stocks and bonds as they run a real investment portfolio with money donated to the business department by professors.
The Student Management Investment Fund (SMIF) class invested $10,000 in bonds as a class project so far this academic year, and reaped a $50 profit.
Dr. Richard L. Runyon, advisor of the year-long class, said in the two years of SMIF's existence none of the preceding classes made a profit.
"The reason for the class is not [to see] how much money they make," Runyon said. "It is the learning experience. Last year they lost $500."
If the class makes a profit, Runyon said the money will go back into the department to be used for scholarships, faculty conferences and computers.
The class liquidates their stocks and bonds at the end of the semester. Students then have to explain their profitable or unprofitable investment choices to a board of professors within the College of Business Administration.
The students are required to invest a certain percentage of the portfolio in stocks and a certain percentage in bonds. So far the students have only invested in bonds.
"We want to buy stocks and we want to make money," senior Brian Rogers said. "We could throw darts at a board and say, 'Let's buy that one,' but at the end of the year we have to explain to the board why we invested what we did. We have to sound rational."
Recently in class the students discussed how the news of peace in Iraq affected the price of stock in the off-shore oil drilling company Global Marine Inc.
"We put in an order with our broker to invest in Global Marine Inc. at $20 per share. Presently the price is $22 per share," graduate student Robert Simolin said. "The price of oil dropped because war is not going to break-out in Iraq. As a result, Global Marine stock dropped."
Simolin thinks oil prices will increase in the spring and peak in the summer, so now is the time to invest.
"Global Marine may never hit $20 per share. We are not the market. We don't set the price and we are running out of time," senior Christina Holley said.
There are safeguards to prevent the students from taking on too much risk. They are not allowed to invest in derivatives, such as options and futures. Hillary Clinton's investment in cattle futures would not work for these students.
Also, they are not allowed to make foreign investments.
"It is too risky," Simolin said. "There is less information available and not all countries have a Securities and Exchange Commission."
Students who want to take the class must submit an application and complete an interview with the advisory board of the business department.
"This class has been a lesson in team work and diplomacy," Rogers said.