Bentley Investment Group

Okay, this has really been bugging me over the past few days. This year I joined the Bentley Investment Group, aka BIG, and unlike most freshmen this was not my first time participating in an investment club that plays with real money. This week I sat in on the E-Board meeting where we discussed our current strategy due to the economic conditions facing the market. For anyone who is not familiar with the money that the group invests, it is part of the endowment. Essentially we play with (used to be more before the market crash) just above $500,000 of the schools money. Personally I believe that this is the only way that students are going to be able to understand investing in their personal and professional careers. No matter how many times you read about the best strategies and the fool proof methods to making millions in your IRA, you will never understand what it is like to front your own capital in the market or understand the feeling in the pit of your stomach when you make a bad choice.

Regardless, the essential mission of the club is to provide students with a learning opportunity. The club has performed an annualized return of just under 10% before the market crashed this year. This is unbelievable considering the goal is to teach students about investing. However, the topic this week was the accepted decision to sit out of the market at least in the short term. I understand that we are playing monopoly with hundreds of thousands of dollars, and I understand that the problems the market is facing may have been the worst we have ever seen. Another Waltham institution, Brandeis University, could potentially face selling off parts of their museum because they are so financially unsound (many of their longtime donors are victims of the Madoff scheme). Sitting out is not the solution. Nothing can be learned from this. I refuse to see the benefit to the students in simply studying the market trends for the next year to see what is happening; THAT IS WHAT WE DO IN CLASS EVERY DAY! The real value of this club and this institution is being able to walk up to a Fidelity recruiter and have him ask me about my experiences in the club, “What are you bullish on right now?” “Well I recently pitched Apple when it was down below $80 because I love the fundamentals and I feel that the market is overly scared about Steve Jobs health problems.” Then we could engage in a discussion that I have had a learning experience from. Maybe I will have to explain my biggest mistake as pitching Starbucks at $18 because I believed that the brand name and strong market share among those impenetrable to the recession. These are the types of experiences that are going to help students learn and grow and give them something to talk about. It would be irresponsible for the group to sit out just because the market is performing horribly because over the long run markets perform predictably.

Another problem I have with the club is their strategy, although they say that like to look for value companies. I cannot see how they can possibly look for value in one year (the lifespan they say they hold stocks). Given I have only invested since I was 16, everything I have read which ranges from Peter Lynch, to Warren Buffet analysis, to Monish Pabrai, to wealth managers like Robert Kiyosaki and Robert Shemin, as well as conversations I have had with analysts and C.E.O.s at small firms like Sentinal Securities, to large firms like Fidelity have reaffirmed my believe that the market does not perform reasonably in the short term. It is almost impossible to time the market in the short term and as their definition of short term refers to a year or less, medium length refers to one to three years, and long term means more than three years. Since the days of Benjamin Graham, value investing has been recognized as the smartest way to invest because the market moves predictably over the long term. Eventually if you buy an undervalued stock, the price will reflect the true value. How can BIG teach its students value investing if it is making plans for the short to medium time frame. IT CAN’T. This is an issue that needs to be addressed.

Thanks as always,

Matt