Montana business invests in students

Invest early, invest often and invest smart. These are common refrains one hears these days, at least when one listens for ways to cash in on a secure financial future. But actually learning how to invest well can often leave one open to the direction—and misdirection—of online profiteers with various dreams of their own.

This is now changing as technology and a desire for real-life learning is coming "online" in its own right. Take the example of the D.A. Davidson & Co. regional brokerage firm of Great Falls, Mont.., where its emphasis is on putting its own dollars on the line for a Student Investment Program where life in the markets is the teacher.

Begun in 1985 when online investing was just emerging, the Davidson strategy took some early innovative steps to get business students in on the potential payoffs (or losses) of actual market participation. Instead of simulating such experiences through software or classroom activities however, the company was one of the first to provide upper-level business and finance students with $50,000 for teams at several regional colleges and universities to invest—in the financial markets and in their own learning. And, if the participants are successful, some of the earnings actually go back to their school for future educational needs.

"It's not that I haven't learned in my finance classes," said Steve Smith, a current student at the University of Utah, who will be in their current team project through May 2006. "But it's that I have been able to bring together all of the material I have learned and make connections between the various concepts of finance theory. And most of all, it has been fun!"

Currently operating at some 20 schools within Davidson's operational area, the program is open to juniors, seniors and post-graduate students who are selected by faculty members to engage in this "real-world investment knowledge and judgment that the student will use throughout his or her lifetime."

The teams of students assess the potential of various common and preferred stocks, as well as corporate and government bonds listed on the New York, American and Pacific Stock Exchange. Option contracts and futures, which are often deemed of significant risk, are not allowed in their portfolios.

"And then once the students invest," Smith said of his team's efforts, "our work doesn't stop there. We track the daily events and movements of our portfolio."

The Davidson & Co. donates one-half of each team's investment returns above 5 percent to the participating school. (Davidson absorbs any losses.) So far, the schools have received over $252,000 in donations, and the students have earned a more secure understanding of what lies ahead in their business futures.

Others have recently used the idea behind the Davidson project as well. Perhaps the most well- known similar project is the Iowa Electronic Markets. Through this conceptualization (which is now used at more than 100 universities throughout the world), students invest their own smaller amounts of real money ($5 to $500) into a broader range of social and economic factors, including a company's quarterly returns, stock prices or even a movie's box office receipts.

The IEM has also gained fame for its use of the power of collective decision-making and monetary investments to make predictions on important social and political events, including presidential elections and a range of current events.

While other projects like these are becoming more available for students across the country, it isn't only colleges and universities who have confidence in the profitability of this kind of hands-on predictability.

The U.S. military's intellectual planners recently did some speculating of their own on how well collective predictions can help strategists understand the outcomes and impacts of such worldly phenomenon as war and peace. A project called the Policy Analysis Market (PAM), for example, sought to create an investment system where individuals could place their bets on numerous factors that might influence a nation's (or a dictator's) plans for the future. Negative media derailed this experiment with reality as having reached too far into the world of financial speculations.

But for students like Smith, the emphasis remains on the specifics of the making of smart investments of his own through the opportunity provided by D.A. Davidson.

"I think this has been one of the best learning opportunities of my life," he said.

And if given the chance, it's clear he could probably provide you a background paper on the pros of directing your own dollars toward the making of investment professionals just like him.

More information about the Montana project can be found by clicking here.