For years, Harbert College students interested in portfolio management have been able to use many of the same tools of the trade as Wall Street brokers. They have gained experience using Bloomberg Terminals, Morningstar, and FactSet.
What they haven’t had, until recently, is the expectation that any investments they make will have consequences. Most have managed “virtual portfolios” and made “virtual trades” in classroom settings, but there’s nothing like weighing a decision that holds the promise of real gains or losses.
“Until you have real money at stake, you don’t understand what it is to invest,” says Harbert College senior finance major Zach Spencer. “Students need to experience real risk and real returns.”
As president of the Auburn Student Investment Fund, Spencer will help students from a variety of majors roll with the wins and losses. The organization, which is open to students of all majors who are interested in investments and finance, made its first “real” trade this month. In doing so, Harbert College students joined an elite list. Fewer than 5 percent of business schools offer experiential learning through student-managed investment funds.
Harbert College associate professor Jitka Hilliard, the Auburn Student Investment Fund advisor, says the move from the virtual to the actual will enhance student professional development. “They have all done these virtual trades,” she says. “It is clearly an excellent teaching tool, but it is very different from investing real money. If I ask right now, ‘Would you buy a stock of Apple?,’ you will probably say yes. Will you really do it with your money? It is very good that the students can not only express their opinions about the stocks, but also carry the responsibility that comes with trading it.” All trades are approved by the fund’s faculty advisor, an alumni advisor, and the college’s dean.
The Harbert College is seeking a leadership donor who can help build the Auburn Student Investment Fund into a robust, long-lasting opportunity for hands-on learning. According to a survey of accredited business schools conducted by the website universityfinancelabs.com, the average student-managed investment fund balance for North American schools is $2 million. Any gains from the Auburn Student Investment Fund’s performance will go back into the college for students to manage and allocate to projects they deem beneficial to the student experience.
Spencer, who recently completed an internship as a portfolio management analyst with SunTrust Robinson Humphrey, compares the experience of managing real dollars to playing golf for the first time. “You must develop your swing. Many shots are going in the woods, but a couple are going to be right on. Until you have the club in your hand, you don’t understand what it is to play golf.”
In a 2014 article for BizEd, the magazine of the Association to Advance Collegiate Schools of Business, Montclair State professor Deniz Ozenbas and Baruch College professor Robert Schwartz described the experiential learning value of student-managed funds this way: “Trading rooms allow them to be graded, not just by their professors, but by the marketplace.”