Randomly Noted

Ah, the innocence and optimism of youth. Even about financial markets.

Those sunny qualities were on display in an investment strategy essay turned in by fifth grader Kelly Decker of Kansas City, Mo. Her sober and reflective investment plan, aimed at helping pay for her college education, was among the winners in a competition sponsored by the foundation of the securities industry trade group SIFMA.

There’s precious little financial and investment education provided America’s school kids, so cheers for the knowledge spread by the Securities Industry and Financial Markets Association Foundation program. About 20,000 students this year entered the foundation’s essay competitions. 

Mutual fund disclaimers tell you past performance is no guarantee of future results, and in Kelly Decker’s investment case, the accuracy of that warning would be plenty helpful. That’s because recent past performance for the sort of long-term, balanced investment plan highlighted in the essay has been anything but encouraging. 

The aspiring  investor wrote that she plans to take much of hard-won earnings from chores, babysitting and future summer jobs and place them in the U.S. stock market.

Kelly wrote that she has a “low risk tolerance” and a limited investment time frame for college.  About 25% of her investments would go to “blue chip” companies, and the rest to mid-cap and large-cap stock mutual funds. As college looms closer, Kelly wrote she will invest in the purported greater safety of bond funds.

Good luck.

As for a simple dose of (admittedly historical) market reality and the fact that long-term investing sometimes really means long term, consider that the Dow Jones Industrial Average continues to flirt with the 10,000 mark, a level it first scaled in 1999.

To meet the student’s goals, she’s counting on an average rate of return of 10% for the stock and mutual fund investments and 5% from the bond funds. The idea is to turn $28,000 into $34,000 to be applied toward a bigger number needed to cover the costs of four years of college at a state university.

I’ve just come from a chat with the University of Michigan’s president, Mary Sue Coleman, and was tempted to headline this blog “Michigan’s Only Bright Light.” But I decided that would be unfair and inaccurate – in addition to U Mich, there are certainly other things going well there, just not all that many due to the Detroit auto industry’s collapse and wretched unemployment.

As Coleman puts it, the University of Michigan has been in austerity-budget mode for several years; it was fairly obvious shortly after she arrived on the scene, in 2002, that the U.S. auto industry was in decline and public funding for the university was heading downhill. The economic crisis sealed the deal, and along with state money, alumni giving dropped. So did the university’s endowment, which took a 21% hit.

Coleman is dynamism personified, despite a broken hand wrapped in a cast: when she says she actually likes the fund-raising chores that plague college presidents, one believes it. Of course, extracting money from alums’ wallets has been rather difficult since the economy tanked, but Coleman sees signs alumni interest may be picking up.

Continue reading…

The curmudgeon in me says: NO MORE TANNING BEDS IN CAMPUS DORMS! Check out colleague Dawn Wotapka’ story on the fact that college kids are demanding tanning beds or booths in college housing – despite the health risks and costs involved. Tanning beds have become “an amenity in many dorms that some budding scholars consider as essential as high-speed internet and good cuisine.” Moreover, students increasingly require tanning beds rather than “stand-up machines” because they “want to relax horizontally, instead of standing up,” one analyst tells Dawn. I would like to see the heads of the U.S.’s institutions of higher learning band together and actively discourage the use of tanning beds and booths on campuses and in college towns. Do adults (including young ones) not know the dangers of tanning beds – from falling asleep and incurring horrific burns to raising one’s skin-cancer risk? When my son, now 11, was a toddler his nursery school teacher in London was badly burned after snoozing in a tanning bed; she spent a long time in hospital and recuperating at home. It was awful. These stories need to be told.