Newsletter

Name: Russell Christensen Hometown: Delta, Utah Majors: Finance and Accounting Engagement Track: Leadership

Financial Management

This project was a way to practice choosing a portfolio of stocks and managing them for a period of three months (thirteen weeks) from May 1st to July 31st. In addition to the simple stock searching, choosing, and tracking, I wrote correspondence to a “client” every other week informing him of how his portfolio performed and which sectors did well.

I tried to outperform the S&P 500 index over this timeframe, so I chose 45 stocks that seemed to have the potential to do well while diversifying away the inherent risk of investing. Overall, I managed to earn a positive return, above the costs of setting up the portfolio but I failed to surpass the S&P. For the most part the stocks chosen gained a little return, but a couple didn’t recover like I thought they were going to. A market segment, Consumer Goods, performed much better than I expected, and I was left wishing I had put more of the $150,000 portfolio into that segment. The segment usually performs the same as the market does overall but the stocks I chose were able to do exceptionally well.

The inspiration for this project came as I was part of the Investment Scholars Group at SUU. The premise of the group is to choose stocks from different sectors and invest real money to try and earn as good of a return as we can. Through the group, I was able to be in meetings with various professionals in Investing or Finance. It was common for the professionals to share the story of how they got involved in the industry and I had the thought that managing a portfolio may be something I would want to do as a side-job. My experience in Investments 1 and in Investments 2 also opened my eyes at what Portfolio Management entails. All of this together piqued my interest and so I felt I should give it a try on my own for my project.

A challenge that I faced while doing this project, is the fact that the future is unpredictable. There is no sure-fire way to invest so that you will be guaranteed a positive return. As I researched stocks, most all of it just came down to judgement. I looked at the finances of the companies, their ratios, and what their business entailed and from there, I just had to choose. Another challenge that I had to face was that trading too much would lead to a loss. I had built a $20 fee into the portfolio for each trade made to make it more realistic since stock brokerages charge for each trade and the fees can become onerous.

This project may only seem beneficial to me, but it has the potential to help others in the future. Finances, preparing for retirement, and knowing what to do with excess funds aren’t things that people are very comfortable managing themselves or they may not have the knowledge to be able to take care of those things themselves. I hope to have been able to learn these things well enough to help others either as a job or just by being a source of knowledge and a resource to them. It wasn’t beneficial for others now, but it has the potential to later.

Experience breeds knowledge and confidence. I think additional experience has been the most beneficial part of this project to me. To start investing alone without any experience would likely be very risky and could be disastrous. To combat this potential issue, I felt like additional study and practice would be beneficial. Because of this project, I feel like I have a better grasp of Investing and the importance of diversification. If I hadn’t diversified to the degree that I did, I could have chosen the few stocks that really didn’t do well for me and as a result I would have lost a significant amount of the portfolio. Overall, the benefit to me has been experience.

The market is most definitely complex, but it does provide us a good way to make our money work for us if we choose well and give it sufficient time to grow.