Students bringing Wall Street to Penn

Online trading has made it easier for students to invest in the market. Although he has no aspirations of becoming a stock broker, Wharton and Engineering junior Andrew Riddle estimates that he spends five to six hours every day researching, trading and watching stocks. His accomplice is a specialty Bloomberg terminal, positioned strategically in his bedroom. A server-dedicated machine, it provides Riddle with up-to-the-minute real-time news and quotes throughout the trading day. Riddle and a friend, Wharton junior Wayne Chang, bought the computer together and split the $2,000-per-month subscription fee. "My parents are not in Wall Street or anything, but I have always been somewhat interested," Riddle said. "When I turned 18, I set up an account and I just traded more and more as time went on." With the accessibility of the newest Internet technology and a booming stock market, young people at Penn and across the country are joining the ranks of savvy investors and getting a piece of the stock market through online trading. Students gather at Wharton Reprographics in the basement of Steinberg-Dietrich Hall throughout the day every weekday, their eyes fixed to a lone television monitor. They stand mesmerized as stock prices flash across the bottom of the screen, announcing the financial activities of the moment. Between classes, many Penn students stop in at computer labs in Steinberg-Dietrich and Vance to quickly check the status of their stockholdings. "I think you can't help but watch the stocks the entire trading day from 9:30 a.m. until 4 p.m.," College sophomore Aloke Chatterjee said. Chatterjee opened his first online account with E-trade last January and said he trades two or three times weekly. "If I have a spare moment, I try to get in front of a computer or TV -- it becomes something of an obsession," he said. A popular professional form of trading at the moment is "day trading," which involves quickly buying and selling stocks and then cashing in all the earnings at the end of the business day. This type of trading is nearly impossible for a full-time student to engage in because it demands constant attention. "It would be pretty difficult with classes to do day trading," Riddle said. "I don't know of anyone who day trades in the truest sense of the word. It's too difficult to schedule." Instead, most students execute multiple trades several times weekly using online brokerage services. After setting up accounts with such online firms as E-Trade and Schwab, they can buy and sell stocks instantaneously and avoid high private broker fees. "Every kid [who is involved] uses the Internet to trade stocks, not an established broker," Wharton sophomore Jeff Braverman said. "Why pay a commission when you can pay a minimal flat rate?" The recent stock market craze among young investors can be attributed to several variables, according to Finance Professor Jeremy Siegel. He credits the boom to "the stock market doing extremely well and tech stocks which smart, young students are attracted to already." At the beginning of each of his Finance 101 classes, Siegel holds a 20- minute session to discuss trends and happenings in different markets. Even students who are not enrolled in the class often attend just to participate in the discussion. "We talk about what is in the business headlines, we look at sectors of the market, where the money is flowing between the markets, but we do not look at [the progress] of individual stocks," Siegel noted. His market analysis is also available online. To fund their monetary ventures, students use a combination of resources, from parental contributions to past summer earnings and profits derived from their current stockholdings. For Braverman, his bar mitzvah money provided the perfect starting point for his stock-trading career. From there, he engaged in what he described as "pretty close to day trading," but soon realized that it was too risky and difficult to sustain a gain over a long period of time. He said he now trades with a more conservative approach. And "buyer beware" is a phrase now frequently heard by young investors. "The market becomes dangerous because suddenly [it] is opened up to all these people who are investing, not knowledgeable, and it is no longer a rational process but rather investing in a name," Braverman said. "When you trade online, the buying and selling seems very easy," Chatterjee said. "The commissions are also a lot lower, and this can lead to reckless trades?. You can get stuck with a huge loss." Yet despite all the possible pitfalls, students are not hesitant to engage in online trading. "Young people are more willing to assume risk," Braverman noted. "They don't need a steady income, they are not a widowed, 70-year-old woman and they are more risk tolerant."