Learning with Smith’s New Investment Club
Trinity Peacock-Broyles ’03
Inside the Green Street headquarters
of Women and Financial Independence -- the one-year-old Smith College
program in financial education -- potted plants, contemporary chrome
furniture and plenty of computers give the office a sleek,
fresh feel. A banner that declares "Life
is Long -- Start Planning Your Future Now!" and a green plastic
piggy bank that sits on a top shelf suggest the landscape of
finance, as do scattered copies of familiar magazines -- BusinessWeek,
Smart Money and Fortune -- and bookshelves packed with financial publications.
linger after a lecture by Jim Miller, assistant
professor of economics, to ask more questions about
the stock market. Every Wednesday at lunchtime
throughout the fall semester, Miller discussed the latest financial news.
The lectures, which were free and open to all students, were always well
attended. Photo by Jim Gipe.
one look into the office’s front window announces to passersby
that the stock market is closely watched here. A closed-captioned television
monitor, usually tuned to CNBC, faces the sidewalk, broadcasting the latest
financial market news. Although some days the financial reports are not
for the fainthearted,
40 Smith women are now studying the roller-coaster performances of such indicators
as the Dow Jones and Standard & Poor’s 500 Index.
These students are
members of a new club -- unique to Smith -- that gives
students $100,000 to invest. The Smith College Investment Club (SCIC) was
launched this fall and is supported by the WFI program, which is designed
to teach women
the principles of money management.
"We wanted to start an investment
club so students could have a hands-on experience," says WFI director
and Smith economics professor Mahnaz Mahdavi. "We believe it is
important for women to know how to invest -- to go for it.
The students are learning aboutteamwork as well because
they are a diverse group in many ways, especially in terms
of their interests and backgrounds. The SCIC provides members
with a great experience
will enable them to put into practice what they have learned."
The official invitation
to join SCIC traveled in early September throughout the Smith
community, emphasizing, "No prior
experience required…Fully student-run…with real money ($100,000 to
start)!!!" The club roster now includes French majors as well as economics
majors, financial neophytes and veterans of other investment clubs.
The 40 members,
who have autonomy in managing the $100,000 endowment, meet on a regular basis
to discuss asset allocation, analyze fund performance and decide
how to successfully manage a well-diversified portfolio.
After spending the fall
in the research and planning phase, the club is now ready to begin investing.
Soninder Dhesi ’03, SCIC president and an economics
major, says, "I think the six weeks we had off for winter break gave
us a great opportunity to continue to follow the market and to begin to get
comfortable with what’s going on."
The SCIC members say they are
up to the challenge of managing a $100,000 portfolio. Every asset, stock
or bond that the students purchase to add to the club portfolio
is decided by majority vote. Important investment decisions are more easily
made because of the division of club members into industry groups to study
sectors: consumer discretionary, consumer staples, energy, financials, health
care, industrials, information technology, materials, telecommunication,
services and utilities. Each group researches its assigned sector and then makes
a presentation to the entire club, which then deliberates and votes. As a part
of the educational portion of the club, members will visit Wall Street and
the Federal Reserve and invite experts to contribute their views.
For its first year,
the SCIC has a realistic investment strategy: "low
risk and moderate returns" Dhesi says. Amanda Schneier ’05, club
secretary and government/French major, points out, "If we can make it work
in the current economic situation [bear market] we’ll be able to do better
Schneier appreciates the club because "it’s something
new and unconventional
for a school our size. It’s exciting to be part of the beginning."
Investment club members meet
on a regular basis at the WFI headquarters on Green
Street and are learning teamwork and investment principles,
says Mahnaz Mahdavi (center), WFI director and Smith
associate professor of economics. Photo by Jim Gipe.
emphasizes "the fact that this is a women’s environment [leads
us to] approach the investment club in a different way.
"It’s about time we have this sort of thing at Smith," she
adds, "because we have the tools and the resources to make it a successful
club. I think our approach is very different from other colleges because we don’t
focus just on economics; here, we really want to set up our own standards."
recent University of California at Davis study found that "women’s
portfolios gained 1.4 percent more than men’s portfolios in a study that
spanned from 1991 to 1997. In fact, single women did even better than single
men, gaining 2.3 percent greater returns on their portfolios." A 10-year
study by the National Association of Investors Corporation found that women’s
investment clubs were more successful than their male counterparts, "racking
up 23.8 percent average compounded lifetime annual returns compared to 19.2 percent
for male clubs." Executive Female’s May-June 2002 issue mentions
that "the statistics indicate that all-women clubs outperform their
male counterparts as well as the overall market." Club vice-president Banu
Demirkiran ’03, a physics and economics major, points out that while the
majority of traders are men, "what we’re doing isn’t trading,
it’s long term. We really focus on the group and teamwork."
$40,000 of the seed-funding for the club initiative came from an alumna donation.
The remainder of the money was raised through donations, including
funding from Goldman Sachs. The investment club officers will work with Jay
Yoder, director of investments at Smith College, who oversees
the college’s $775
million endowment and was the recipient in 2002 of the Foundation and Endowment
Money Management’s Nonprofit Investment Officer of the Year award.
of the club’s earnings will be reinvested, while the remainder
is divided equally between the financial aid budget and the Student Government
Association, says Mahdavi.
Club members are encouraged to attend WFI’s free
noncredit courses, lectures and workshops offered throughout the year on a range
of financial topics. A class
this spring will cover entrepreneurship. Another in the principles of investing
will show students how to analyze financial data and how to understand asset
allocation. Smith professors teach the classes, and financial leaders will deliver
Mahdavi expects that SCIC members will earn high returns that will benefit
many students and organizations on campus that rely on support from SGA and
aid. She told the gathering at the club’s first meeting, "I hope
that when you come back in 10 years and the club has [a fund of] $1 million,
you can say you played a part in its beginnings.