Students at the Episcopal School of Dallas have been managing a stock portfolio using school reserve funds – and that opportunity has even given them an unplanned lesson in market volatility after the stock market plunged in the wake of the COVID-19 pandemic reaching the U.S.
Upper school students in ESD’s Student-Managed Investment Fund club manage a small amount of the school’s reserve funds for long-term capital expenditures, school spokesperson Emma England said.
“I’ve sat in on several meetings, and it’s seriously impressive what these teenagers are able to do with their finance and investment knowledge,” she said of the club, which is modeled after collegiate programs and is one of the only independent school versions that allows students to use real money – not hypothetical investments and short timeframes.
“I have participated in multiple virtual investment competitions, and although they teach short-term trading methods and some basic criteria for investing, I have learned about the implications of the market structure, certain investment models, and long-term, dividend-yielding strategies from being part of the club,” said ESD student and club co-president Lauren Weber.
“Although this is a financially scary time, it provides us with a really unique learning experience — how to manage our financials during economic crises.” -Lauren Weber
How successful has the club been? Since it began in 2014, it has earned returns on their funds averaging 7.7% per year.
“The fund teaches its student managers about investment principles, careers, capital markets, and the economy in a manner that is almost unique for high schools: actual funds invested for the long-term benefit of the school,” said Robert Buchholz, who serves as the club’s sponsor, and is the chief financial officer of ESD. “Our goals are preservation of capital, diversification of industry, and long-term growth.
“We all keep up on current events, the market and its swings, and terms and actions used in the business world,” said Lucy Sinwell, co-president of the investment club. “This allows our club to preview the investment world as well as hear from many successful businessmen and women who give us advice as well as teach us about their specific profession.”
But both Weber and Buchholz said the latest market drops provided even more learning experiences.
“The market’s decline has served as empirical evidence of why it is so important to have a diversified portfolio; it has helped us to minimize our damage,” Weber said. “Although this is a financially scary time, it provides us with a really unique learning experience — how to manage our financials during economic crises.”
Buchholz said that although the group’s portfolio is down 16% from the top of the market, it’s still 5% above the cost of the current investments.
“The fund’s student managers are reconciling signals that the economy could be reopened soon with very real concerns about further spread of the virus,” he said. “The fund managers are strong believers in the value of holding a diversified portfolio, and recent performance has only bolstered that point of view. They are currently re-evaluating the fund’s investment goals with an economic recovery and market rebound in mind.”
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