A Lucky Apple and the Evolution of an Investment Strategy

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During the annual Wharton Global High School Investment Competition, student teams from all over the world build on and refine their investment strategies, or the principles and moves they use to guide the stocks they choose for their investment portfolios. Many of them are learning these investment concepts for the first time, while others are applying knowledge that they have gained through their own experiences with the stock market.

Never thought about investing? Starting when you’re a teenager may have its advantages. The younger you are when you begin, the more compound interest you will earn. For example, a $100 monthly investment that earns a 10% annual return grows to $226,049, $632,408 and $1,732,439 over 30, 40 and 50 years, respectively. 

Christopher Hall, a senior at The Blake School in Edina, Minn., has spent his entire high school career – and most of middle school – investing in the stock market. This fall, he heads to the Fu Foundation School of Engineering and Applied Sciences at Columbia University in New York City, where he plans to major in financial engineering, which uses mathematical techniques to solve financial problems. In this essay, Hall (who is not a part of our investment competition) writes about his love for investing and the evolution of his own investment strategy.

When I was in the 6th grade, I became fascinated with the stock market. The opportunity to make money excited me. Even more than that, the prospect of making money without actually doing physical work intrigued me. So I created a phantom portfolio through Google, which allowed me to buy real stocks with fake money. I would spend my entire recess staring at a computer screen in my school’s computer lab, watching my stocks tick up and down. Through dumb luck and favorable market conditions, my phantom portfolio doubled in value, and I was hooked.

This taste of success inspired me to begin actually trading stocks with my personal savings, and I nagged my parents to set up a brokerage account for me. After much persuasion, my parents gave in to my requests and set up a custodial brokerage account, which is managed by an adult for a minor who is under 18. Of course, the portfolio was my responsibility.

Apple Salvation

In 2008, on the eve of the Great Recession and at the end of a great bull market during which stocks had soared, I began trading. In fact, on the very day that I skipped going on a school field trip to open my brokerage account at a Charles Schwab office, the stock of the formidable investment bank, Bear Stearns, took its first major price hit. This would later lead to Bear Stearns’ failure and was a premonition of what would happen to several other financial institutions and the market in general.

Despite entering my investing career in tough market conditions, somehow I fared all right. Initially, I made some poor investment decisions, and the fact that the stock market was imploding contributed to some substantial losses. However, a lucky investment in Apple in early 2009 paid off, and I was able to make up for all my early losses. This experience, while having no financial benefits, was invaluable. I learned how to evaluate stocks, started to keep up with financial news and gained numerous insights on trading stocks. Further, the experience of making and losing money was very beneficial and taught me money management skills and a thing or two about my own personal finance habits.

There is no better feeling than when an investment pays off. Conversely, the feeling of realizing a loss (selling a stock for less than you paid for it) is not one that you want to repeat. However, experiencing failure taught me to be resilient and that losing money is an unavoidable part of investing. This lesson not only helped me in trading, but in life as well. I believe that the ability to come back from a shortfall is one of the most valuable traits a person can have, and investing taught me this.

As I got older and entered high school, I read books on investing and started to understand more of what I was doing. Rookie mistakes that had tainted some of my early investments, such as a lack of patience and poor timing for moving in and out of positions, no longer plagued me, and I actually started to turn a modest profit.

Now, I have developed my own strategy. I look for stocks that I believe are trading too low based on their historical prices. When looking at this data, I have to take into account the current state of the company and the direction of the market. I inspect price data for the overall market and the specific stock. If the price seems lower than normal, and if both the market and the stock are on the rise, then I usually invest. This is not a foolproof method, and I am leveraging the fact that I am young and do not have many expenses. I can be aggressive and do not have to sell too quickly if I experience losses because I have time to wait for the stock to rebound. Currently, I am very interested in stocks involving gold, such as the gold trust, GLD. Gold prices have fallen almost 30% this year, so I see it as a good value buy. So far in 2014, the market seems to be slowing down, and in uncertain times people tend to put money back into gold.

‘Read The Wall Street Journal’

I encourage my peers to begin investing in some way because it is a valuable life skill. Everybody at some point will have money that you need to manage and put away for later in life. Also, you can learn many valuable lessons about yourself, like how to deal with failure and how you manage and hold up under stressful situations.

You can get involved with investing in different ways. You can trade stocks with real money as I did, or you can access great phantom portfolio systems out there. For instance, the investment club at my school uses the website, Market Watch, which allows you to compete with friends and also affords you the opportunity to invest large sums of money. Get out there and read The Wall Street Journal, open an account on Market Watch and follow a few stocks online. I guarantee that you will learn a lot and also have fun.

Conversation Starters

Describe at least three lessons that Christopher Hall has learned about investing.

In terms of his investment strategy, what does Hall mean when he says, “I am leveraging the fact that I am young and do not have many expenses.”

Hall talks a lot about learning from failure. Why should we not be afraid to fail? Why is this especially important in investing?

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