As the stock market continues to sink, students are learning how to swim through courses and organizations at Penn State University that model the fast-paced, high-risk environment of Wall Street.

Despite another 0.5 percent interest rate cut by the Federal Reserve this week, the Dow Jones dropped to a two-year low Wednesday as the economic slowdown persists. Students are learning to deal with such scenarios.

In his first year at the university, Ali Chaudhry, president of the Penn State Investment Association, developed an interest in investing through discussions with family. "It reminded me of baseball cards, which I enjoyed collecting when I was younger," he said.

Rather than wait around for an investment organization to materialize on campus, Chaudhry decided co-founding the Penn State Investment Association (PSIA) in Spring 2000 would be just the thing to quench his desire. "You learn about theory (in courses), but you don't get to apply it. That's the opportunity we (PSIA) give to students," he said. "(This is) a very hands-on type of organization."

When the idea was first conceived, founders sought to model the association after various student-managed funds across the country. While proving themselves in the past year, the organization has increased its membership from 20 to 85, and has evolved into something more than a typical research meeting.

Members of the PSIA maintain company portfolios from in-depth research used to make investment decisions with a fictional $5 million that is kept track of on paper. The organization consists of six departments: research, trading, performance, compliance, publicity and commentary. Teaching students how to invest, the PSIA is open to everyone, despite major or prior investing experience.

In addition to its interactive appeal, guest speakers also disperse knowledge to students. In a videoconference, students talked to members of Goldman Sach, a prominent investment bank on Wall Street. The PSIA has plans to place people from its organization in Wall Street jobs, Chaudhry said.

In the midst of the sliding market, the PSIA portfolio has seen some diminishing investments. Due to foresight and steps to counteract the breakdown they are still outperforming the Standard & Poor's 500, a commonly cited market index that includes 500 of the largest companies from around the world, said Nate Kline, PSIA treasurer.

Kline's personal investments in "penny stocks," smaller weighted stocks, have been doing fine since these lighter assets are not as linked to the trends of the market.

Though he believes recovery is close, the market has not gone down as much as it is going to and without a change in attitude, no rebound will occur, he said. "There's not much conviction in the market to buy or sell. . .Not a day with everyone bearish (market slang for thinking stocks will fall, opposite of bullish)," he said.

"I've been really impressed how students have pulled this organization togetherxdents are producing better reports than they would in class for a professor, he said.

Hatheway is also an adviser for the Penn State Chapter of the Financial Management Association. Aside from giving advice, he teaches Finance 410: Speculative Markets, a course that focuses on securities, tradable financial assets such as stocks. His goal is to get students to believe in themselves and in their abilities to use the basic tools of finance to solve what appear to be extremely complex problems.

"Of course, the risk is that rather than feeling confident, I'll have confused them so badly that they're worse off for the experience," he said. "It can get real complicated real fast."

From the positive feedback received so far, he believes his students are up to the task.

"(Derivative Securities) are considered to be either 'rocket science' or 'financial engineering' by many people. . . I'm really tired of hearing from Penn State students that 'well, we're not Ivy League'. I've taught at an Ivy League school and attended several; those students don't walk on water. The best of Penn State and schools like it can successfully compete with top students from anywhere," he said.

The course features students in teams of three trading against each other in a simulated market with a year of potential changes in market prices compressed into about five minutes. "By the end (of the course) we're having a week of compressed time flash by in 15 seconds as the students struggle either to make a profit or protect a portfolio from loss," Hatheway said.

Professors such as Steven Huddart, associate professor of accounting, have also included stock-related themes in their courses. Huddart teaches Accounting 404: Managerial Accounting, where a course segment is spent covering the mechanics of employee stock option pricing as well as teaching tax planning for employee stock options in his Accounting 597I:Taxation and Global Management Decisions course. A stock option is the right to buy or sell a stock at a certain time for a certain price.

"Students sometimes must choose xoptions, and a job that offers options and lower pay. Deciding which compensation package is better can be difficult. Another difficult decision is deciding when to exercise your options," he said.

Huddart has set up an experimental web page (http://www.smeal.psu.edu/faculty/huddart/ValuatorExperimental/index.shtml) to provide students with guidance on when to exercise options by analyzing submitted companies.

Students such as Jason Hunt (graduate-business administration), vice president of the Penn State Marketing Association, are also experiencing trouble with their investments, but are optimistic.

"I accept that there's going to be some short term volatility. That's the nature of the beast," he said.

Hunt has investments in technology stocks such as software, biotechnology and semiconductors.

"So many tech stocks were over-valued to begin with. They are approaching more realistic evaluations," said Chris Maynes (graduate-business administration). Introduced to investing by his brother, Maynes has been investing for six years and is going to hold onto his technology stocks in hopes that things will turn around.

Non-technology stocks have also been affected, but Kline is not surprised. "Anytime techs sell-off big time it is bound to spread. Non-tech companies are very cyclical," he said.

Surprised to see the market down for so long, Hunt is confident things will reverse by the end of the year, but believes outside forces had an influence on the market. "I think partly because of the timing of the election and (President) Bush talking about recession from the beginning caused investors to lose confidence," he said

For future investors, or those already investing, there is some advice.

"I encourage investors to read up on different strategies and pick one that fits their financial risk tolerance," Chaudhry said. He sees investing in the market as a positive thing as long as people work within their limits.

Education is also a key ingredient to success according to Hatheway.

"Don't skip on math and accounting courses. Take them very seriously," he said

Hatheway has faith the storm will eventually pass for the market and urges that there is still a future in the stock market. "I am just riding this out," he said.

"I'm waiting for the market risk premium to increase. In English, I'm waiting until everyone thinks that investing in the stock market is for idiots. Then there will be terrific bargains, and I don't mind being taken for an idiot."