In a time where the average college graduate carries at least $20,000 of debt, University of Michigan sophomore Chris Stallman bucks the trend.
In just six years of investing, the 20-year-old has paid for nearly two years worth of his share of undergraduate education, which is also supplemented by a partial school scholarship. The pre-business major plans to graduate with minimal debt — a mission he sought at age 14.
Stallman then spent three months researching the stock market and companies. Next, he collected his college savings, birthday money and other gift money — totaling about $3,000 — and placed the sum into a Roth IRA and the Stein RoeYoung Investor mutual fund.
“My mindset was I was looking for companies I wouldn’t mind holding all through high school and if the situation was right, holding all throughout college,” the self-taught investor said.
His quest for college cash through investing became a lifestyle, and life lessons to teach other teens. At 15, he and his friend Dan Bassett started TeenAnalyst.com, a resource for young investors, which Stallman still runs today. The site has received praise from The Wall Street Journal and The New York Times.
“At that point, I felt I had a very strong understanding of money basics and would do a good job teaching others my age,” Stallman said.
The prodigal investor has been featured on CNBC’s Squawk Box, CBS News, Money magazine, Bloomberg Personal Finance magazine, and Barron’s. Stallman’s portfolio now is made up of 50 percent stocks and 50 percent cash, so he can make tuition payments.
In addition to maintaining his website and going to school full-time, Stallman plans on working again this year at Michigan’s business school. And he’s begun fostering an investment community on campus. This fall, he and some friends launched the university’s first investors’ group, called the Michigan Investors Club (www.michiganinvestors.com).
He plans to graduate in two years with a degree in business administration, and is interested in pursuing a career in venture capital or investment capital.
Here’s our interview with Chris Stallman, including his words of advice for young investors.
YM: What would you say was the best part about deciding at age 14 to save money to pay for college?
STALLMAN: The best part has been the lessons it’s taught me. Sure, financially, it’s nice to know I can pay tuition. But I know that that takes a backseat to all of the money lessons I’ve learned. I’ve learned to set goals and take the steps to achieve them. I’ve learned to manage my money wisely. Looking around, I see tons of other college students weighed down with credit card debt. And it feels good to know that I don’t have to worry about that because I’ve made good money decisions.
YM: Has your portfolio changed at all since you started investing? What about your strategies?
STALLMAN: My portfolio has changed a little. I began investing with the idea that my money would go towards college. So now that I’m in college, I’m starting to put some of that money to use. About 50 percent of my portfolio is kept in cash for that reason. But as for my investment strategy, it still remains the same. I still look for stocks I can see myself holding for five, 10, or even 20 years.
YM: How would you answer skeptics who think that students are too young to invest because they don’t truly understand the stock market?
STALLMAN: I think it’s pretty easy to stereotype students as impatient investors who are just going to “gamble” their money away. But young investors today have far more resources available to them. There are websites, magazines, mutual funds, books, etc. geared specifically towards them. I’ve noticed a considerable change over the years. It just seems like young investors today take advantage of these resources and have a better understanding than those five years ago when I was starting to invest.
YM: What are your investment goals?
STALLMAN: My financial goals are to graduate from college with little debt, buy a house, have a family, and eventually retire. I use investing as my means to achieve that. I hope to earn a high enough rate of return to afford a good life without too many worries about money. And hey, if I make a few million bucks along the way, that won’t be bad.
YM: How do you describe your investment style?
STALLMAN: I consider myself a buy-and-hold investor. I take a fundamental approach by trying to “value” a business. I do this by reading through their annual reports to get a sense of what the business is doing, how it stands financially, and what its growth prospects are. If the company is financially sound, has growth potential and I feel that it’s undervalued, I invest in it. But I never invest in companies I don’t understand. I wouldn’t invest in some biotech company I know little about because I feel that investing in what you don’t know is inherently risky.
YM: How have corporate scandals affected your thinking, and when you buy investments?
STALLMAN: It’s unfortunate that such corporate scandals have happened and have affected so many people. But it hasn’t had too much of an effect on me. Sure, I’m a little more hesitant now, but I don’t let it deter me too much. I feel that if I invest in a company with a lot of integrity and good management, I’ll avoid that.
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