Though they may be few and far between, some students see merits of investing in the stock market

People often use college as an analogy for investing in one’s future, but some Kent State students are looking for a different type of return – dividends, that is.

Joe Walker, a senior manufacturing technology major, said he has been investing in stocks since November.

“I started out with a mutual fund my parents gave me while I was little, and I sold half of that and bought a bunch of individual stocks,” he said.

Walker first became involved in the stock market through his interest in fantasy football.

“I had a fantasy football team, and then I thought about it,” he said. “I was like, ‘If I spent the same amount of time investing in the stock market as I do looking at players’ stats, I could probably make some money out of it.'”

To date, Walker has accumulated a gain of about 10 percent, putting him at about $4,000 in investments.

Walker said he finds investment to be a fun activity, but it can also be risky for college students, said assistant finance professor Shelly (Xinlei) Zhao.

“The stock market is very volatile, so I wouldn’t count your tuition on it,” she said.

In recent years, prices of individual market shares have dropped, increasing the ease of entry into the stock market. Zhao said that contrary to what some may believe, this does not make the stock market “friendlier.”

“If you only have a few hundred or even a few thousand dollars, transaction costs can easily overwhelm any amount of money you make,” she said.

Smart investing

For many students, the stock market is a completely foreign concept, but there are ways they can make investments for little money and less risks.

Zhao said one of the better ways students can go about investing in stocks is through mutual funds.

Mutual funds are companies that continually issue new shares to its shareholders, and then buy them back at their request.

David Dumpe, associate professor of finance, said one of the advantages to investing through a mutual fund is that it gives you a well-diversified portfolio.

Dumpe said having a diversified portfolio means a person’s investments are spread out between individual shares with various types of companies, rather than wrapped up in one. This makes for less risky investments and increases the chance of profiting in the long run.

People can enter into mutual funds through larger companies such as Vanguard and Fidelity for costs starting at about $500.

Zhao said mutual funds often have very few requirements, but they do have disadvantages as well.

“With mutual funds you can only buy and sell at the day’s closing price,” she said.

Because mutual funds add shares to a person’s investments and sell them, Zhao suggested another type of trading called Exchange Traded Funds (ETFs), which allow shareholders to buy and sell at any price during the day.

She said ETFs tend to be less expensive and also more tax efficient than mutual funds.

Zhao also suggested students make investments outside the United States.

“The U.S. is quite developed, so upward potential is more limited than it is in less developed countries,” she said.

Contact features reporter William Schertz at [email protected].