Lost $17,000 : College Class, Had Lesson of Value in Crash

When the stock market plunged 508 points on Black Monday, a dozen Illinois State University students found themselves enrolled in the school of hard knocks.

Students in most college investment courses build fictitious portfolios using make-believe money, but in Ezra Byler’s class the Oct. 19 lesson cost hard, cold cash.

The students watched nervously as their portfolio plummeted in value from its high in September of $76,000 to $59,000. In the trading days before the crash it had eased back to about $71,000 to $72,000.

“They lost $17,000,” Byler said. “That’s the reality of the thing. And it did temper the mood of the group some. It’s a subtle thing. It affects one’s ego a bit.”

‘Sobering Experience’

After the crash, the students held an emergency meeting to discuss investment strategy after the crash. Student Kurt Glore said they decided to take a cautious approach, but have continued to buy and sell.

“It was a sobering experience,” Byler said last week. “I think this group will be a little more cautious and a little less arrogant in their investments when they graduate. They’ll be more critical of their analyses in the future.”

“This market correction has provided a unique opportunity for this class to study the market, analyze it and learn from it,” he said.

The class manages the Educational Investment Fund, set up in 1983 by an anonymous donation of $50,000. They vote on strategy and look for long-term investments.

A decision to buy stock is forwarded by Byler to the trust department at LaSalle National Bank in Chicago, which holds the portfolio. The professor and a trust officer have veto power.

First Loss for Portfolio

At semester’s end, the portfolio is turned over to a new group of 12 students.

“We don’t attempt to move in and out of a cash position,” Byler said. “We’re not into detailed market-timing. But the students get a kind of realism using real money that you just don’t get when you have pretend money. It’s valuable experience for them.”

This was the first time since the class was created that the portfolio had decreased in value.

Some students’ pocketbooks also suffered.

Glore, a senior from Washington, Ill., had invested some of his own cash after a 108-point drop on Friday, Oct. 16. When the crash came on the next business day he suffered a 20% loss.

“It turned out to be a poor decision,” said Glore, who hopes to land a job with a brokerage or in an investment bank. “Had I waited a day, I could have bought it much cheaper.”

‘Valuable Experience’

Todd King, a student from Bloomington who hopes to be a banker, used some of his own money to go bargain-hunting after the market plunge.

“The crash seemed like an opportunity to me,” King said. “I bought some Ford at $70, which I think was a good buy. I wish I’d waited even longer because I could have bought it at $60.”

“This was really valuable experience,” King said. “I don’t think it made me a more conservative investor but really enhanced my learning experience.

“This is a really wild class,” he added. “It’s totally different than any others I’ve had.”