Student investors: Buy or sell?

Despite the current economic downturn, stocks are still moving, and part of that activity could be due to student investors.

Current data from the New York Stock Exchange shows that after a sharp drop in shares traded in August, the number of trades taking place each month has almost doubled, reaching a high point for 2008 activity in October.

Carlson School of Management finance professor Timothy Nantell said the current economic situation is ideal for “bottom feeders,” or groups of people with cash on hand who invest while they feel stocks are being sold for less than their real value.

Students, most of whom have a long time before they will need to call on their investments, are also in a unique position, Nantell said.

“If they have some extra money and they can let it ride for a while, it’s good because they have a long horizon,” he said.

University of Minnesota student investors Dan Rice and Bryant Ruffalo agree, and are putting more money into the stock market.

“There’s an old stock market saying: ‘At the time of ultimate pessimism, that’s when you should be buying stock,’ ” said Rice, a finance sophomore and president of the student Investment and Finance Organization.

That theory, which Rice called the “Warren Buffett philosophy,” has led Rice to beef up his investments recently.

“Lately, I’ve moved cash from my savings to my brokerage fund to buy stocks,” he said.

Ruffalo, a management information systems junior, has also put more money into his Roth IRA and 401k plan in the last month.

“I increased my investment by a large amount about a month ago because it was pretty cheap,” Ruffalo said.

For investors like Rice and Ruffalo, Nantell said now may be a good time to invest.

“People who have liquidity, or cash, and who have experience, at a time like this, they think it’s great,” Nantell said. “Whether they’ll be right or not, we’ll see.”

Nantell said there are currently two main theories on the economy. One is that stock prices are low because of a temporary crisis, and despite the cause it will soon go away and stock prices will go back up.

Nantell warns investors, however, about the second scenario, where the market is returning to normal after years of a long and favorable run that caused sloppy investing.

“If I knew the answer, I wouldn’t be sitting here,” he said. “No one knows the answer.”

Nantell said, however, that inexperienced investors need to be careful.

“If I was advising a student, I would say to find a professional manager,” he said. “Don’t do it on your own.”

Ruffalo and Rice, however, see the current times as a great opportunity for students to get involved, they said.

“Most students are viewing this as more of an opportunity than anything else,” Rice said. “If they had previous investments, I’m sure they lost money, but I think the majority of young people right now are putting more money into the market.”

Ruffalo agreed.

“If you have the money I would say now is a good time to buy,” he said. “It will go down in the immediate future, but eventually it will go back up and that’s when you make the money.”