I plan on starting a partnership once I turn 18. Is a college degree useful if I am going to start my own AM business? If not, where is the best place for practical knowledge?

Hello WSO,

I am 16 and have been interested in investing since I was 11. I opened my first brokerage account at 12. Likewise, I recently started managing accounts for some friends and family, including retirement. That being said, I plan on starting a partnership once I turn old enough to do so.

Enough about my life story, in your opinion, how useful is a degree from Kenan-Flagler, or maybe Wharton? Would I get a tangible benefit from it, or would I not learn anything practical? Are most of the knowledge from business schools available on the internet?

tldr: I really dread being a wagie at some investment bank or crummy 401k fund, so I will probably not attempt a job at those. I need real, practical knowledge; would university be useful for this?

 

philbegas

A few comments, some serious and some snarky. First of all, you capitalized the first letter of every word so on the surface of it - you could use some more schooling.

He actually didn't. Go back to Off Topic and look at the topic subject. Every word isn't capitalized. WSO just does that to the subject when you click on the thread. 

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee
 
Jeff C. C.

I do plan on getting the licenses necessary. Besides that, there are no laws that I would be breaking.

https://www.kaplanfinancial.com/resources/getting-started/how-to-get-yo…

At a bare minimum you need a series 7 if I understand correctly. In order to take the series 7 you need to have a sponsorship, which no one will give you if you don't have a college degree. You should probably stop doing what you're doing, before your parents get sued for your trading mistakes. 

 
Jeff C. C.

Hello WSO,

I am 16 and have been interested in investing since I was 11. I opened my first brokerage account at 12. Likewise, I recently started managing accounts for some friends and family, including retirement. That being said, I plan on starting a partnership once I turn old enough to do so.

Enough about my life story, in your opinion, how useful is a degree from Kenan-Flagler, or maybe Wharton? Would I get a tangible benefit from it, or would I not learn anything practical? Are most of the knowledge from business schools available on the internet?

tldr: I really dread being a wagie at some investment bank or crummy 401k fund, so I will probably not attempt a job at those. I need real, practical knowledge; would university be useful for this?

How much money are you managing exactly?

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee
 

Pretty much the most important question aside from the obvious legality problems.

Do you know that a typical asset manager - even a hedge fund, only takes ~20% of profits and 2% of AUM (if that). If we're talking about an AM/WM. Were talking <2% management fee on AUM that's it. To make the US average wage on that (~50k/yr) you'd need 2.5M under management. To make the same as what an IBer makes out of college you'd need $6-10M AUM. Excluding any costs of business. 

 

Assuming this is not a troll - have you calculate how much AUM you'd need to even make a normal living? Never mind IB or other finance salaries, I'm talking average Joe $55k/year salary. Can you match the performance of ETFs, year after year? What do you - as an asset manager - offer that others can't? Is your performance skewed due to the bull run?

Don't get me wrong, you could be doing alright now - but people are much more forgiving when it comes to ambitious whiz kids, than regular adults. 

 

"Buffett bought his first stock at age 11 after he said he'd read every book on investing in the Omaha library, some of them twice. Buffett studied at the University of Pennsylvania, University of Nebraska and Columbia Business School."

https://www.bankrate.com/investing/warren-buffett-profile/#:~:text=Buff….

"If you always put limits on everything you do, physical or anything else, it will spread into your work and into your life. There are no limits. There are only plateaus, and you must not stay there, you must go beyond them." - Bruce Lee
 

First off, I commend you for being passionate about asset management and taking the initiative to actively manage a portfolio at a young age. However, I would advise caution especially regarding the legality of your actions given you're both a minor with no formal license or training to management these investments. 

Second, a bachelor's and college degree are useful for teaching you the context behind practical experience, they can help provide resources, guidance and open career paths as well as offer more stability in the long run. Getting an internship through college is like getting practical experience with training wheels, you're effectively a net neutral or net negative at the company, but you can basically learn a lot at a huge scale and learn the best practices at established corporations. 

You say you want real, practical knowledge, I personally think a college degree that teaches a mixture of finance and law would give you the necessary exposure and background to establish your partnership without exposing yourself to legal risk. The internships can help provide exposure to best practices by seniors a few decades older than yourself and it can help establish a foundation for your career. 

Let's consider your case: you want to take some practical coursework and upskill. To do so, you could easily find the necessary courses in Udemy, LinkedIn, Coursera, EdX or MIT's free course database. You could also find a number of books that teach practical guidance of the financial vehicles at disposal and efficient tax treatments for these investments. But that in itself wouldn't help you portray legitimacy (or legality given you need a trading license to handle other people's money). Even then, let's say you had a client willing to trust you, a minor who manages family & friend's portfolio, with their retirement savings. If the market takes a downturn and that investment sum goes down, what protection do you have against personal liability of assets or defense of expertise/fiduciary duty? 

All this to say that being passionate and taking initiative is fantastic, but at this stage in your life, you don't know what you don't know. Do you know why some entrepreneurs work in Investment Banking or Consulting prior to launching their company? They gain exposure in seeing what works and doesn't work, they gain a nest egg of finances and gain merit behind their name prior to venturing out on their own. 

 
Most Helpful

what you are doing is against the law, stop it now. you can manage your own money and recommend investments for family members assuming they do it all themselves, you are not legally allowed to manage money for anyone else, stop doing that ASAP.

answering the question about knowledge. markets are the best teacher, but they're an unreliable source of income, and since the past 5 years have been pretty good for investors (apart from this year so far), don't make the classic mistake of mistaking brains with a bull market. you may be getting good returns, but it could've just been dumb luck and not any skill (because they look exactly the same from a CAGR standpoint until you've been through multiple cycles). I've learned far more from reading and actually being an investor than I ever learned in school. what I did learn in school that helped me was more of my history and philosophy classes, because the fear/greed cycle and psychology is way more relevant than some macro indicator that only works in models ceteris paribus.

here's what I'd do - think in terms of optionality. if your trading goes well, you'll be financially independent before you can legally rent a car. if it falls flat as it has with so many of my friends who've tried their hands at trading (and yes, even starting as early as you did), then it'll be nice to have a college degree to fall back on. go to a good school, study 2 things - something practical like math, CS, or accounting, and then something that makes you well rounded like philosophy, history, foreign language. do your trading all throughout university, and then if you're still going well, find a cushy job in government or nonprofit that allows you lots of free time in markets, and then reevaluate at 25 years old. by then we will have been through the current cycle and maybe beginning another downturn, so you'll have a better sense of whether or not this was luck or skill, and you'll still be young enough to hit the reset button

 

To be clear, all the trades have been made with the permission of my parents, so I am not breaking any kind of law (They approved of, and submitted each and every order). I appreciate the concern, though. If I do manage other people's money, I would need a certification.

I would also like to comment that I am not a trader. I follow a strategy similar to Seth Klarman's. I pick cigar butts, I don't gamble with technical analysis or quant models or whatnot.

 

EDIT: since you are not logging into their accounts you may be in the clear. I was under the impression you gained access to their accounts, not them physically going in and pushing the buttons. you may be OK

I remember being 16, I thought I knew it all, and you sound smart, so just be aware that hubris is CAGR killer. stay curious, I'll be back when you're ready to receive advice, you're not there yet, stay humble or get humbled my friend

finally, cigar butt investing isn't actually what made ben graham nor warren buffett most of their money, it was GEICO (a growth stock of the day), so diversify your strategy away from only deep value. I've had way more success with buffett's buy a great business at a fair price than buying businesses at great prices (div growth, GARP, etc.)

 

Yo bro, few things in life are mutually exclusive. In fact, learning to cultivate 'gray thinking' - i.e., not thinking in terms of black and white, is a very recommended practice in therapy to live a better life.

What I mean is - it's not one thing or another. You can go to university AND learn real practical knowledge. You can do both. In fact, many people on WSO would argue that university is a ticket for real practical knowledge. Think about it - without a degree, you won't be able to even apply for good internships at the top firms like GS/ BLK/ Fidelity etc. And internships and analyst stints at those firms, are the most valuable and practical knowledge out there.

What you know now is impressive for a 16 year old, but without a degree, you might be limited to the resources you have rn, which are basically just books like Security Analysis, and your experience in managing your relatives' money. Have you thought of the possibility that once your peers get older and wiser, they get into target schools and land roles at top AMs and banks, and they surpass you that way?

And you're making a few misguided assumptions here:

-  Are most of the knowledge from business schools available on the internet?

You're assuming that you go to school to go to class. No. You go to school for the brand name, network, experience, credibility, and everything else that comes with it. Everything you learn in class can be learned thru self-study. That's not the value of school

I really dread being a wagie at some investment bank or crummy 401k fund

You're assuming that you're gonna be a wagie at some IB. No. IB jobs are competitive and most people don't break in

how useful is a degree from Kenan-Flagler, or maybe Wharton?

You think you're likely to get into Wharton?

 

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