With a faltering economy and an unstable post-Sept. 11-stock market, student investors are finding it difficult to part ways with their money to invest in stocks and mutual funds.
With the added corporate scandal surrounding some of America's largest corporations such as Enron, ImClone, Tyco and Adelphia, many investors have been left searching for safe and reliable investments.
"Mutual Funds are probably the best way to go still," said Leslie Kessler, president of LJK Associates, an Investment Banking firm in Long Island, New York. "They are still great for beginner investors because they are a lot less risky and volatile than stocks or bonds."
According to the Wall Street Journal's Guide to Understanding Money and Investing, mutual funds are comprised of many different securities, meaning that the success of the fund is dependent on several companies rather than one or two.
"Buying a mutual fund provides instant holdings in several different companies, giving a level of stability to your investment," said Kessler. "In this economy that is important to people because it makes them more comfortable."
Steven Balestri, a sophomore undecided major, has had some luck with mutual funds.
"My family and I invested some of my graduation money from high school into mutual funds and it is doing really well now," he said.
Stocks are another type of investment, which if made wisely could be very profitable, according to Kessler.
"Stocks are equity investments, which means you are a shareholder and partial owner of a company whether it profits or not," she said.
Stocks such as AT&T and General Motors are considered blue chip stocks because they are the largest and generally the most consistently profitable corporations on the market. The reference to a blue chip stock ultimately refers to the blue chips used in Poker, which are the most valuable chips in the game.
"I have small amounts of different blue chip stocks that were given to me throughout my life by different relatives," said Michael Brewster, a sophomore engineering major. "They have done great over the years for the most part."
According to Todd Richheimer, an investment banker at Bear Stearns in New York City, stocks do not have a fixed value.
"When the forecast of the company shows growth, investors drive up the price by buying more shares. When the forecast of a stock shows a poor outlook, it drives investors to sell the stock they already own and drives other investors away from that stock," he said. "It is the law of supply and demand at work."
It is important for all investors to remember that the stock market can never guarantee success, said Richheimer.
"The best thing you can do is research every aspect of the stock or mutual fund you are looking into purchasing," said Richheimer. "Know what you are putting your money into inside and out."
Companies that are publicly owned publish profit and growth reports that can assist investors in choosing whether to purchase stock in a company. They are available from several Internet sources, such as www.etrade.com, as well as from individual company Web sites.
"There is a lot of information out there if you want to be smart about investing," said Richheimer. "You need to be responsible and take the time to look at everything from past years' growth to price charts to new innovation within the company. They all play a role in whether a company will be profitable and make you money."
