I decided on my particular (and unique, compared to others’ projects I have come across through the last couple EDGE courses) as I was in Investments II. Investing is something that I haven’t been exposed to before coming to SUU and more specifically the last two academic years here. I have enjoyed learning about something new and having to try to do well on new material, unlike the General Courses we are all required to take. Since an EDGE project is required to graduate, I figured that I would formalize something I would have done anyways, track the stock market and some specific stocks to see how well the ones I had in mind performed. To formalize it, I decided to set a specific amount to “invest” and invented a reason to send emails to a “client” (the quotations are being utilized since no real money and no real client was involved in the investing) and to track its performance compared to the S&P 500 index fund. Had I not formalized it, I wouldn’t have needed to invest as much time and effort, but I would have only kept my scope to the performance of the individual stocks instead of comparing their total performance to the stock index. After I made my decisions, I researched each of Yahoo Finance’s market sectors and then used that research and my existing knowledge to decide which of those segments to focus funds in. After that, I looked at the financials, ratios, and trends of many stocks. I chose 45 of them based on what I already knew and ones that I judged to provide a reasonable chance to provide a positive return. I then brought in data from Yahoo finance into an Excel workbook and then used that one to summarize the data to move into other workbooks that used line graphs to track and compare stocks. After reviewing the performance every two weeks, I drafted and email that would have been sent to the client (who I decided wanted to be very informed of the portfolio’s progress) to inform him of the portfolio’s performance by sector and in total. This tracking lasted for 13 weeks, using data points of every five trading days. After the 13 weeks, I drafted a quarter-summary email that included an annualized return (assuming the quarter’s trend would continue).
I had two goals in mind: earn a positive return that would earn back more than what was expensed in “trading fees” and to outperform the S&P 500. I was able to earn 2.73% return (after trading costs) that would be annualized to nearly 11% so the first goal was met. The second goal wasn’t met since the S&P (with no trading cost adjustment) earned 6.97%. Apart from those goals, I wanted the outcome of this project to be an increased understanding of the market and a better feel for what Portfolio Management would entail. Now that the project is over, I can put a check-mark next to each of those. I had to use my judgement/decision-making, had to research stocks, and I had to imagine how I would need to communicate with clients – all of which have increased my confidence, knowledge, and understanding. Regarding Leadership, having the knowledge necessary and being able to communicate with clients to learn their desires and needs are important factors in being a leader in Portfolio Management. That profession is essentially based on Leadership since you are there to direct a client in their financial future while needing to be able to keep their goals optimistic and realistic. The clients are trusting their funds and future, and so they rely on the portfolio manager to make the right decisions, to guide them in their financial health, and to be able to communicate effectively the clients’ financial position. Knowledge, as part of leadership, is something that is easy to overlooks. If you are less knowledgeable than everyone around you in a technical profession, you will be unable to either be a leader or to be an effective one.
The EDGE program was implemented to force (yes, force—we sometimes have to do things we don’t want to as part of life) students to put together a specific project and to document it which can be valuable in a couple different ways: real-world experience in the field chosen for the project and the process of planning, obtaining approval, obtaining funding (in some cases), and then reporting on the successes and/or failures of the project. Those may all be beneficial for a potential employer to see. For downsides of the EDGE program, I have come to see that many people would have done projects such as their EDGE projects even if not required by this specific program. I also feel that the EDGE program uses a lot of resources that could be used elsewhere such as decreasing tuition (I believe a lot of funds aren’t used in the best way at SUU). I fear that for the implementation of the EDGE program, the entire focus was put on the potential benefit while the opportunity costs and financial costs were ignored. As an additional though, those students that are required to do a capstone project stand at a disadvantage. Capstone courses are usually the last ones taken in a degree and EDGE 4000 level classes wouldn’t be possible to take after without doing another semester. I think having EDGE when a capstone project is required for graduation is probably redundant, especially with so many other competing academic, personal, and professional priorities. The program is a good resource for those working on projects or for project idea creation, which is beneficial for those looking for more service hours (such as med school applicants). The program itself has both potential benefits and negatives and I feel it is unfair to only portray it in its best light, so I freely shared here what I thought were the reasons for the program and its positives and negatives since they were things I found myself reflecting on each time I worked on my portfolio management project.
This project is a good opportunity to be involved more with the happenings of the financial sector. Saving for retirement is a big, important aspect of people’s careers and a large majority of the funds that are saved for retirement end up in markets, whether it be a company’s own portfolio or a mutual fund through the likes of Vanguard or Fidelity. There are far too many people that have made mistakes with their extra funds. Benjamin Graham wrote in “The Intelligent Investor” that doctors are favorites of brokers and those that make a living through trading and investing as doctors have money and intelligence. Since, they are intelligent, they think they are smart enough to make good investing decisions. Without the proper know-how or principles, they are likely to get burned. I want to become competent enough to not have that happen to me or my family. In addition to all that I’ve mentioned so far, investing is something that is interesting to me.
While this project will give me experience, I could have done it in a less formal manner. The experience will be beneficial and I hope to gain confidence and competence. I also hope that if I am to make serious mistakes while investing, the mistakes occur as part of this project. I think that learning from my mistakes will be the best way to improve, instead of just practice. A concern of mine is the regular time commitment this project will require because I know how busy life gets. Another concern I have is that the market will either go down by a large amount, making it very difficult to gain a positive return in such a short time-frame. Ideally, the market will fluctuate both up and down so I get to manage a portfolio in both situations. I am of the opinion that it is easy to earn money in a rising market, but it is much more difficult to protect the principal investment at the same time. In conclusion, I am less excited than I am curious about the proceedings of this project, but I do look forward to the experience gained.