Middle school students try investing in a turbulent market

St. Louis Post-Dispatch (MCT) - Seventh-grader Tristan Papes has been keeping an eye on the recent turbulence in the stock market.

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So has professional money manager Chris Lissner.

Lissner, president of Acropolis Investment Management, has studied the market for more than 30 years. Papes, who attends McKinley Middle School in St. Louis, has been purchasing imaginary stocks for about a month.

At this point, their financial philosophies are pretty much the same.

"You just have to be lucky," said Papes, whose class has been playing the Stock Market Game. In the game, students manage a virtual $100,000 by choosing how and when to invest in the market.

Lissner said the seventh-grader's assessment _ what he learned in the first four weeks _ is mostly correct. Even professional investors would have a tough time making money if they were given only a semester, he said.

"The market over any short-term period of time is random," Lissner said.

So it's probably just a fluke that the class's 13 students, broken into four teams, turned a profit in the stock market during a month of economic turmoil. Combined, the novice investors made $2,379 in fake money during the month the St. Louis Post-Dispatch followed their progress.

The teams are competing against each other and against teams at Orchard Farm Middle School in St. Charles, Mo. The top two groups will be invited to an awards dinner sponsored by Wachovia Securities.

Kristen Wimbley, who teaches the class, said the students' success has been a little surprising considering the economic environment. She said she warned the class at the start they probably would be competing to see who could lose the least money in the backsliding market.

Wimbley has led classes playing the Stock Market Game before, but she said the circumstances were right to make this experience more unpredictable.

"The market doesn't usually change drastically during a two-month period of time," Wimbley said.

Seventh-grader Khory Stark doesn't offer up luck as an explanation for his team's surprising profits.

Stark has worked diligently on the team's portfolio outside of class, digging through the New York Stock Exchange's Web site at his home computer in search of stocks that seem to be doing well. To make his assessments, he examines the line graphs representing the stocks' values and reports back to his team.

"If we see it's doing good and it's going for a low price, then we buy it," Stark said.

Stark's research is not particularly scientific _ his team often knows little or nothing about the companies they buy _ but the strategy has worked. The group has earned $1,605 in a month, more than any other team in the class. Halfway through the game, they were ranked 71st out of the 1,296 teams playing the game across the U.S.

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The team's most profitable decisions were made when they coincidentally bought into the financial sector in mid-October as the federal government was settling on a bailout package. They invested in Bank of America and Fox Chase Bank, a company they mistook for the Fox television channel. Both have made them money.

Their best investment was in 300 shares of Aegon, an insurance company Stark said he had never heard of. It has made them $1,280 so far.

"The day when I researched it, it was at a major increase point," Stark said.

The other three teams took a slightly more predictable approach, buying stock in companies they were familiar with.

Devlin Downs and her three teammates spent their first class period checking up on some of their favorite businesses.

"We're each looking up a popular company we know to see how it's doing," said Downs, a sixth-grader.

The results? By their fifth meeting, the team had acquired stock in AutoZone, Apple, Walgreen Co., Dell, Children's Place, Hot Topic, McDonald's and Sally Beauty Supply. And they were out about $360.

Although consumer stocks, such as those the team purchased, have been suffering in the shaky economy, financial education specialist Suzanne Gellman, who works for the University of Missouri Extension, said their strategy wasn't misguided.

"There's absolutely something to be said for buying what you know," said Gellman.

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The tactic worked a little better for a team of four eighth-grade boys. They put most of their money into technology, an area that team member Eddie Harper said they were interested in. They bought shares in Apple, Microsoft and Sony.

"We like computers," Harper said.

But the team also gave a thought to the likely future of the stocks.

"Christmas time is coming up," team member Ben Trask said.

The Apple stock surged throughout October, which more than offset the losses on the team's other stocks. They were up $871 midway through the game.

Gellman said she is a believer in the simulated investing games for students. It's good to teach them about the market, she said, and it encourages young people to save money so they eventually will have something to invest.

But Gellman strongly cautioned against putting real money in the stock market and expecting to profit by moving it around like Wimbley's class. It's just too risky, she said.

"My guess is it would be sort of like throwing darts at a dartboard," she said.

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© 2008, St. Louis Post-Dispatch.