Guest columnist Dane McNulty is a senior financial accounting student and president of the Baldwin Wallace University Investment Club. After graduating in May, Mr. McNulty will take a full-time position as an investment banking analyst, leveraging the investment knowledge he gained at BW.
Guest columnist Ryan Rivera is a Baldwin Wallace University Business Analytics MBA student with a deep passion for finance, honing his skills through internships and extracurricular activities while in school. Mr. Rivera, who will graduate in May, is pursuing a career in investment banking and is looking for opportunities to leverage his financial modeling and analytical skills to contribute to transaction success.
As finance majors, we have been immersed in the power of investing during our time at Baldwin Wallace University, including hands-on experience managing real capital.
We are the newest students of BW’s Investment Club, which has led the growth of a portfolio from humble beginnings of $150,000 in 2006 to over $1.2 million today. To achieve this growth, we employ careful research using the same Bloomberg Terminal database used by Wall Street traders every day.
Our investment club meetings, where students make all the final decisions to buy, sell, and hold, draw students from across campus.
In fact, our generation has been encouraged to invest in the future from an early age. From parents harping on the importance of saving for retirement to mobile investing apps that are making it easier than ever to buy stocks, bonds and funds, the message to start building your nest egg is everywhere. It’s everywhere.
Social Security and pensions can be unstable by the time we reach retirement age, but building a diversified portfolio should help ensure financial security.
The rise of social media has amplified the investment fever among peers. On platforms like Reddit, TikTok, and X, investing can be idolized as a path to wealth and financial freedom. Posts showing huge profits to be made from risky bets on “meme stocks” and cryptocurrencies have gone viral.
Some young investors feel pressure to jump on the next hot opportunity.
We know what it feels like to take advantage of “unicorn” stocks. BW’s investment club chose his early investment in artificial intelligence chipmaker Nvidia, and the company has generated returns of more than 15,000 percent for him as AI heats up through 2023.
Now, through a detailed covered call strategy developed over time, the initial investment has been able to reap the rewards of owning the stock.
At the same time, we understand that these huge profits are the exception, not the norm.
Certainly, there are advantages and disadvantages to investing at a young age. On the other hand, the power of compound interest means that even modest investments can take decades to grow into a large nest egg.
On the other hand, inexperience and risk appetite can lead to costly mistakes.
Of course, investing doesn’t have to be like our parents did, buying a crappy mutual fund and holding it for 40 years. Digital platforms allow you to trade stocks with just a few taps and make it easy to exchange investment advice through social media.
However, for young investors, it is important to have a balanced long-term approach. Here are some tips:
• Until you gain experience, it’s safer to invest in a diversified fund that tracks the overall market.
• To avoid selling investments during market downturns, maintain an emergency fund with three to six months worth of expenses in cash or cash equivalents, such as a high-yield savings account or money market. Please maintain.
• Contribute to a tax-advantaged account like a 401(k) or Roth IRA as soon as possible to maximize long-term growth.
• Develop a strategy to systematically increase your equity allocation so you can take on more risk. Then, as you approach retirement, you reduce that risk.
• Don’t blindly follow advice that’s trending on social media. Please do your own research from reliable sources.
The bottom line is that building a nest egg is never as easy as it is when you’re young. By prioritizing your investments now, even if it’s just setting aside a few dollars here and there, you can harness the power of compound interest for your future.
Readers are invited to submit opinion page essays on topics of local or general interest. For consideration he submitted a 500 word essay to Ann Norman. anorman@cleveland.com. Essays must include a brief biography and photo of the writer. Essays that refute today’s topic are also welcome.
