D.A. Davidson Program Throws Students Into The Investing Pits

In 1985, D.A. Davidson and Co., a full-service investment firm with roots in Montana, launched a Student Investment Program with Montana State University. The program gives a school close to one of the company's locations $50,000 to invest in the stock market. Students in senior-level investment courses spend a year consulting with any one of Davidson’s 21 program advisors on investment strategies to use the money.

The now 80-year-old firm started the program because it dovetailed with the firm's philosophy that community involvement reduces financial illiteracy and helps firms understand younger generations.

Davidson isn’t the only financial firm aware of the fact that students need hands-on experience. Other large companies--wirehouses, trading firms and their executives--have funded or contributed to the installation of trading floors within universities that simulate the real deal so finance majors can have a taste of what they might be in for.

But it’s difficult to get undergrads and graduates close to the risks that they’ll have to take in real life.

Davidson’s program is placing students as close to the action as they possibly can be by taking on any losses and having student teams manage the $50,000 from a Davidson account.

At the end of the program, half of the portfolio gains above 5 percent are gifted to the student teams.

According to the firm, in 2017 Montana State University had the highest return in the program, 10.6 percent, while Creighton University boasted 6.7 percent.

D.A. Davidson said these returns were benchmarked against the S&P 500, which had a 12.6 percent return, and the Dow Jones' 11.3 percent return during the same period.

Gonzaga University in Spokane, Wash., meanwhile, won the Fred Dickson Memorial Award. The award pays homage to Davidson's former chief market strategist and market expert who passed away in 2014 at the age of 68. The award is given to a team for its overall excellence, apart from returns (the Gonzaga team won a 5.2 percent return). Davidson will award the school an expense-paid trip to a Davidson conference.

“The actual hands-on experience is lacking for students,” says Brent Williams, a research analyst at D.A. Davidson and a co-director for the SIP. The program "helps to solidify a lot of the practices that they’re learning in class,” he adds.