Inside Investment Club

Every Monday at lunch, a group of Urban students gather and discuss investment strategies to manage a fund valued at more than 100,000 dollars. Urban Investment Club, as the group is called, operates under-the-radar from the general student body, with it’s proceedings unknown to those outside of the club. I have been intrigued by this enigmatic group since its inception, wondering how a group of students manages such a large sum of money, and through my investigation, I have learned how the Investment Club works.

Urban Investment Club was started in the 2015-16 school year when the school received a generous anonymous donation to begin a club for students interested in a future of investing. Over the past two years, the club has created a diverse portfolio, and after donating 50% of profits to Urban’s endowment, the club has made over 16 thousand dollars.

From its beginning, the club bylaws (as outlined by the donor) state the primary purpose of the fund is “to provide a certain kind of ‘real life’ educational program for students” so that students interested in finance are able to learn hands-on how the stock market functions.

While other schools have investment clubs making mock investments without actual money, the donated money makes this club stand out. Investment Club President Alex Edwards (‘18) sees the fund as “the beauty of the club.” Edwards said, “The fact that we actually have real money on the line, and real consequences means that we have to be thoughtful, and we have to be informed… It’s a rare opportunity.”

The Investment Club is split up into two parts: the club itself, and the board. “The club is for anyone. If you know nothing about investments and you want to learn what a stock is, what a bond is, that’s what you go to. That’s been what I’ve been focusing on a lot this year, and that’s just teaching kids the basics of investing,” Edwards said. The club meets biweekly, and while there are 52 students on the mailing list, the meeting I attended had 16 students, which is a typical turnout.

One step above the club is the board: a group of eight students, primarily upperclassmen, who actually make pitches and vote on how the fund should be invested. On the board, as Edwards said, “that’s when you start getting real projects.” The board meets every week to discuss not only the fund, but also to create lesson plans for members of the club.

In addition to making investments, the club is a space to learn about investing in numerous ways. The club is currently running a mock investment competition for club members, to experience the decision process of where to invest. Another way the club educates its members is by bringing in speakers to talk about their jobs in finance several times each year. “Generally, every speaker talks about career path, how they got to where they are. Sometimes it’s a very straight path, sometimes it’s a very circuitous path, but that always seems to be really interesting to people in the club,” Diane Walters, the club’s faculty advisor and Urban’s chief financial officer said. Speakers are often invited through personal connections of Urban students, and have included financial advisors of First Republic Bank, where the club invests its money.

Unfortunately, the membership of the club is lacking in diversity. Jade Barnblatt, ‘18, a current board member, said that when she joined the club during its first year, “I was one of two girls who were in it, and as a sophomore with mostly seniors, it was pretty scary,” said Barnblatt. “However, they were really helpful and really nice,” she said.

This year, she said, “There are more girls, which is really great,” but she also later identified the scarcity of women in the club as an issue that continues. “I still don’t think there are enough girls. It is very male dominated,” Barnblatt said.

Larkin White ‘18, a former board member, said that at the beginning of this year, “we would try to determine strategies to make the club interesting for club members, to try and draw a more diverse club membership. That was something they were thinking about early on because… the club has been mostly white guys,” he said. When I went to observe the club, this detail stood out to me, as the group appears extremely white – male – dominated.

While the board pitches and votes on how the fund should be invested, Walters has veto power (which she has never felt the need to exercise), and she is in charge of actually executing the buying or selling of stocks and bonds. “[The students] work through the process to decide what they want to buy or sell, and usually the treasurer would give me the instructions to change the portfolio, and then I execute that through the bank,” Walters explains.

Her principal role, however, is to see that the fund is being used in ways that adhere to the donor’s wishes, as outlined by the original bylaws. “The donor made the donation to the school, and the club is benefiting from that gift, but at the end of the day, it’s the school’s responsibility to make sure the gift is stewarded in the way that the donor requested,” Walters said.

With such a large fund, the Investment Club raises some questions about the morals of using so much money as a learning tool. White said, “I think the fund itself, the fact that there’s eight high schoolers managing 100,000 dollars is a little bit disgusting. At the very least, they’re unqualified to do it.”

White continued, “It also just seems like there’s so many better uses [for the money]… than to have a couple kids play at being adult stock brokers.” Though through my research I now have a new appreciation for the work that goes on, I admit that I remain skeptical about the morals behind the club. So much money for an amateur group is a display of Urban’s class privilege. The fact that the school accepted this large sum for the purpose of a club feels exorbitant to me.

Another point of contention is the large knowledge gap within the club. Barnblatt said that being a club that doesn’t assign homework, levels of understanding vary greatly: “I just think the imbalance of understanding and knowledge,” she said, “is probably the biggest shortcoming we have.”

However, while White said, “I think you could do it all in mock investing because simulators give you all the opportunities to make an investment, and see how it will grow or shrink in value over time,” Barnblatt explained the benefit of working with real money.

She said, “There’s real risk. If it were fake money, people could say, let’s invest in the most risky stock there is.”

In order to ensure the safety of the donation, Edwards said, “We have a very conservative investment approach, which is low risk, steady growth, because we want this club to be a thing and to exist for the rest of Urban.”

This idea matches the bylaws drawn up by the donor, which state, that “the Fund will be designed to give students a great deal of freedom, implying a high degree of responsibility.”

One significant guideline set by the donor is that at the end of each year, the club must donate 50% of its earnings to the endowment of the graduating senior class. Walters described this rule as “an opportunity to learn more about charitable giving, giving back to the school, because that is part of the purpose.”

Barnblatt sees the endowment’s purpose to give a new meaning to the fund: “we’re doing something with the money and not just playing around with it,” She said. “It is for a learning experience but we are doing something with it, we’re reinvesting the 50% that we keep and we’re giving 50% back to Urban.” I think this key feature of the club allows it to claim a sense of purpose beyond education, making the investing a charitable action.

The club has no intention of stopping any time soon. “It’s a great club, it  really is. The student leaders are very thoughtful,” Walters said. “It’s impressive.”