By Tina Dressel
2 June 2006

Ithaca College student Mike Staub has been looking to his dad to learn about investing since he was in middle school. About two years ago, however, he decided to take on the challenge of managing his own portfolio. By putting to the test everything he had been learning from his dad and in school, Staub was able to increase his successes. Staub’s favorite stocks in his portfolio, which includes Volvo and ING Insurance, are actually his first ever purchases.

Staub strives to hold an investment for at least a year because of the positive capital gains tax benefits it reaps. But when this isn’t possible, it doesn’t faze him. When determining what to invest in, he looks at valuation metrics such as EBITDA (earnings before interest, taxes, depreciation, and amortization) and P/E (price-to-earnings) ratios to compare a company with its competitors. After this, he uses a technical analysis method to decide whether to go ahead with the purchase of a prospective security.

Fantasy Stock Market

Staub’s investing methodology can intimidate even an avid investor such as I. So here is how he suggests beginners should venture into the complex world of investing. First, he advocates signing up for the Virtual Stock Exchange or a similar stock market simulation such as youngmoney.com’s stock market game. This way you can learn how to take educated risks and practice picking stocks without risking actual money.

"Investing is an art, not a science, and there are certain lessons that need to be learned," says Staub. Once you see how well you can do with fake money, you will know it is time to open a brokerage account and start investing with real cash!

Once you have opened up your very own brokerage account and are ready to invest, you have to be able to find which stock you want to invest in. Staub suggests either using the wide array of stock screeners that are available on numerous websites or just choosing from quality companies you are familiar with that have a strong brand or popular product. His example is Volvo, a company with a history of making superior automotive equipment and stressing social responsibility in its operations.

After you have found some prospective companies, it is time to get down and dirty with the numbers to really see if this is an investment that you want to put your hard-earned money into. Staub suggest a few websites that he frequents, including CBS Marketwatch, S&P Research, Morningstar, NYSE MarkeTrac and Yahoo! Finance for their vast array of information. He also looks to the company 10-Ks (annual financial statement) and 10-Qs (quarterly financial statement) for detailed business data.

In two years of managing his own investments, Staub has enjoyed many triumphs but also has made his share of mistakes. He attributes his failures purely to judging investments based on his emotions rather than on solid research. To avoid making irrational investment decisions in the heat of the moment, Staub stresses the importance of doing your homework.

While it may seem like high school all over again, reading up on a company to understand truly its business and the industry it operates in can help you weed out the quality companies from the not-so-quality companies, to put it kindly. He likes to read The Wall Street Journal to keep up with the market and current events in companies he invests in. Another mistake Staub has learned from is how big a chunk the transaction costs took out of his return when he made very small investments. He vowed to always keep in mind the true cost of investing.

Taking off from his passion for investing, Staub intends to pursue a career in portfolio management or investment banking. If he can do as well as his role model Eddie Lampert, who began his career at Goldman Sachs and then started his own hedge fund, Staub will be a very happy man.

Take it from Staub: even those who strive to be investing professionals make mistakes. So go ahead and start to learn from your mistakes and your successes!

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