Legacy

For most college students, the phrase “money management” means buying just enough food for the week to stay alive and still have funds for beer.

For Paul Medica III, money management means keeping a watchful eye on the investment portfolio he’s grown since eighth grade. And unlike the average University student, who jumps for joy when his or her account balance has three digits, Medica is managing big-league money — a cool $2.25 million.

It’s his parents’ money, but the finance senior has been a guiding force in making investment decisions to keep the portfolio plump. And it seems Medica has made all the right moves, considering he began with $500,000 in 2004.

“That means that I’ve compounded a portfolio about four times, and that’s a big deal in finance,” he said.

MASTERING THE MARKET

It all started with Tasers.

Medica’s father had a good feeling about investing in the electroshock weapons company. The stocks were cheap at about $9 a share, so the family went forward.

Six months later, the price was climbing rapidly, and it eventually hit $100 a share. So the Medicas took the money they’d made and began diversifying their holdings with their son’s guidance.

It takes a lot of trust to let a teenager manage half a million dollars, but by 2004, Medica had been learning to master the market for years.

“Back in the summer of 2001, it was a typical summer day — I was just clicking around the TV. I ended up on CNBC and it just stuck with me from there,” he said. “I just wanted to know how all this worked. I would just start reading the ticker. If I didn’t know what a symbol meant, I’d be on the computer looking it up.”

Once his financial feet were wet, Medica got trading — in theory. He started out with $100,000 of imaginary money and kept track of his hypothetical investments in a notebook, choosing what stocks he’d buy if the cash was real. The practice paid off, and about three years later he was managing his parents’ portfolio.

But the family’s $2.25 million isn’t the only chunk of change for which Medica is responsible. He’s also one of 27 students handling more than $1 million for the LSU Foundation. That portfolio, called the Tiger Fund, is part of a University finance course called the Student Managed Investment Fund.

THE TIGER FUND

The LSU Foundation began the Tiger Fund in spring 2005, investing $1 million through two installments, according to George Moss, chief investment officer for the LSU Foundation.

And the students have grown that total each year. At the end of the 2010-2011 fiscal year, the portfolio was valued at $1,348,000, Moss said.

“It’s positive and in the right direction, particularly considering the market turmoil that we had at the end of 2008 and into 2009 and, in some degree, what we’re still going through,” Moss said.

Though managing big money isn’t new to Medica, he said his previous investment success doesn’t play into his choices with the Tiger Fund.

“It’s really irrelevant because your past performance isn’t indicative of what you’re going to do in the future,” he said. “It’s all relative. I could lose that whole $2 million back in the market. You just have to stick with what works at the time.”

Since many students don’t have experience managing money themselves, there is guidance every step of the way. The LSU Foundation has an agreement with the E.J. Ourso College of Business outlining how the money can and can’t be managed, which Moss said keeps the students on track and prevents excessive risk-taking.

The students can only invest in companies included in the Russell Top 200 Index, which lists 200 of the largest trading companies in the market.

“They’re only buying blue chip type companies — Apple, Coca Cola, GE, the list goes on,” he said. “Not necessarily does it mean they’re less risky, but they tend to be less volatile.”

The student’s choices are also monitored by course instructor Tish O’Connor, who strikes a careful balance between allowing them to make their own decisions and ensuring the portfolio is managed wisely. O’Connor said she’s careful not to draw conclusions for the students, but she’ll often ask questions to jump-start a discussion about something she feels they should consider.

For the most part, the class makes good investments, and students’ smart management experience pays off later, she said.

“More than once I’ve had students email or call and say, ‘I got my job because of the Tiger Fund,’” she said. “[Interviewers] want to know, ‘Tell me a time you did this.’ It’s very different to say, ‘When I was managing the fund, this is what we did,’ versus, ‘We did this assignment where we choose a company and monitor it.’”

The experience is as close to Wall Street as the students can get in Baton Rouge. The class takes place in the University’s SMART Lab, a simulated interactive trading floor.

On a campus filled with Tigers, the lab is home to a room of bulls and bears.

The 27 undergraduate and graduate students in the course are divided into groups to research and make decisions about nine different sectors of investments, including health care, energy and technology. The course involves learning about the different sectors and making predictions for what will happen within them.

“They’re researching their sectors, trying to understand what is happening in their sectors — what are the companies, what do they do, what drives growth?” O’Connor said. “We take advantage of what we think is going to be happening in the future.”

PLANNING IN THE NOW

Not every University student will get the chance to manage millions before graduation, but they can start improving their financial chops now to benefit themselves later in life.

Though planning for the future is important, the crucial first step is managing one’s cash flow in the present, according to Certified Financial Planner Tim Maurer.

“Even though this is not the sexiest part of financial planning — it doesn’t have as much appeal to it as investing, making a boatload of money and seeing the return — it’s the foundation of every single healthy financial situation,” he said.

And Maurer has seen tangible results from clients who are responsible with cash flow.

“I have clients who were, say, a teacher for their entire lifetime, not making a ton of money, but they managed cash flow well, and as a result of that they’re retiring as millionaires,” he said. “And I have clients who make $250,000 a year and are living paycheck to paycheck.”

But when students have mastered their cash flow and are ready to make investments, Maurer recommends getting educated about personal needs and desires before enlisting a financial adviser.

“Unfortunately, most financial planners are not putting brand new professionals and recent graduates on the top of the list they want to work with because they don’t have a lot of money,” he said.

The famous Wall Street mantra that it takes money to make money is a reality in the finance world, and Maurer doesn’t recommend investing in individual stocks with less than $50,000, “because otherwise you’re not going to get adequate diversification.” But students don’t need an extravagant sum like that to get started.

“What gets the job done is a monthly commitment in most cases,” he said.

Maurer suggested students begin by searching for a fee-only financial adviser — one that is paid for their time rather than through a commission or finder’s fee. That means the adviser has no stake in trying to sell products or policies and can give unbiased advice. The National Association of Personal Financial Advisors, or NAPFA, provides resources for locating fee-only advisers in one’s area.

If an investor starts early and adequately researches the best avenues for them, a monthly commitment of as little as $50 to $100 can be a sufficient investment, Maurer said.

The stakes — and the dollar signs — are much bigger for Medica and his high-value portfolio. But he plans carefully and sets lofty goals, which he recently discussed with his internship supervisor at Prescience Investment Group.

“I told him I want $50 million. He asked why.  I said, ‘It’s halfway to $100 million,’” Medica said. “I’m shooting for the stars.”