On Monday, Sept. 29, University of Denver students watched $21,000 disappear from their investment portfolio in the wake of the stock market’s historic plunge of 777 points. That was real money, not play money like in other stock market simulations.
Real life. Real lessons.
“As soon as the vote [in Congress] started looking like the bailout wouldn’t pass, the market tumbled,” says Jared Skinner, a student in the Marsico Investment Fund class named for Tom and Cydney Marsico, alums who gave $500,000 to establish a portfolio students could manage.
Before Monday, the fund was at $524,000. But on Monday, it plummeted to $503,000. Then on Tuesday, it rose to $514,000.
“It’s an emotional market,” says Skinner, an MBA student from Idaho. “This isn’t a time to freak out, and not everyone is dumping. It’s just a time to re-examine portfolios and look longer term.”
The course instructor, Mac Clouse, says the class is a “great teaching experience.”
“Because there’s so much uncertainty, the students are having to look at more defensive stocks, those that can do well in a down economy,” Clouse says.
Some of those picks include Proctor & Gamble and Johnson & Johnson. “Students hope people [are] still buying soap, shampoo and toothpaste, and they believe the medical needs of Band-Aids and cotton balls will still be there,” Clouse says.
Another stock is CXW, a private corrections facility builder. “The idea is that when times get tough, people turn to crime,” Clouse says with a snicker.
As bad as losing $21,000 sounds, it’s not the worst students have seen. In the two years after the dot com bust, the portfolio lost $290,000.
Still, Skinner is wary. “[In] my personal opinion, we’ve not seen the worst. The credit markets are freezing and people can’t get loans so car sales are way down,” he says. “I believe all this will carry through into the economy, so we have some more rough times ahead.”