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Chem gal gets stock bug
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September 11, 2000: 8:58 a.m. ET
Science student hooked on investing wonders if she has the time
By Staff Writer Alex Frew McMillan
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NEW YORK (CNNfn) - When Jen Scricco turned 17, she realized she wasn't going to get a car. And another idea entered her mind.
"I tried to be a little more realistic, but still get something," she says. So she picked stock.
 Scricco, now 20, ended up with around $2,000 in a Charles Schwab account. The brokerage sent her a list of stocks she might be interested in.
VISX Inc. (EYE: Research, Estimates), which makes laser-surgery technology to correct eyesight, grabbed her.
"I said I would like to do something with technology, so I flipped through the pages and saw that this one did laser technology. I thought it just looked like an interesting stock to own," she says.
Stock charts make good gossip material
Watching the stock in the paper every day became a hobby, Scricco, now a junior at the College of New Jersey, remembers. Unlike for her parents, already planning for retirement, it didn't matter much what happened to her investments. But it didn't hurt that VISX shot up and split twice.
"I was kind of spoiled because I thought, 'Oh, stocks do that,'" she jokes. She sold it after the company ran into a patent fight, for a $3,000 profit.
Before she knew it, stocks ranked with her passions for swing dancing and science fiction. She found out certain friends were interested, too, and they'd gossip about what went on in the market, giving each other 'hot tips.'
Checks & Balances runs weekly. People with questions about financial planning are invited to write in explaining their financial goals. See the bottom of this article for specifics.
"I'm kind of surprised by how many of my friends are interested in stock, people you wouldn't expect," she says. After a pause she adds, "I guess I'm one of the people you wouldn't expect."
She puts her money where her heart is
Scricco loves science - she's studying for a double major in chemistry and philosophy. She has built up a portfolio that includes some science-oriented stocks.
It's worth around $18,000, with holdings like Nokia (NOK: Research, Estimates), Bristol-Myers Squibb (BMY: Research, Estimates), Neurocrine Biosciences (NBIX: Research, Estimates) and Stein Mart (SMRT: Research, Estimates). She also owns a bit of the Warburg Pincus Global Health Sciences fund (WPHSX).
 "Up until now, I've just been buying companies that I find interesting, with no real big-picture view," she states.
She and her boyfriend both own 24/7 Media (TFSM: Research, Estimates), too. She spends much of her money driving to see him in Wayne, N.J., where he's studying at William Paterson University. They go swing dancing and commiserate about 24/7 Media's recent poor performance.
She has also saved up $15,000 in birthday and holiday money, which she has in a Certificate of Deposit. But she wonders if she couldn't be doing better. She has $2,500 in a regular saving's account.
"I would like to move my CD money somewhere else that is generally safe, but somewhere where it will be a little more productive. Maybe bonds?" she writes.
Jersey born, Jersey bred, she's Jersey till she's dead
Scricco's dad grew up in a village in Italy and moved to America when he was 18. Her mom is Italian-American, too.
"I got the whole 'I walked two miles uphill both ways to school' type thing," she recalls. They visited her dad's hometown when she was little, and she remembers how rustic it was, with cows walking the roads and so on.
But Scricco reckons she'll stay in New Jersey, or neighboring northern Pennsylvania. "I go to the Jersey Shore in the summer, all that kind of stuff, and get the train into the City," New York, she says. "This is such a centrally located great place to live I couldn't imagine moving far from it."
She doesn't make much now, though her college costs are covered by scholarships and $1,000 a semester from her folks. She wants to go to grad school for chemistry and work in research or as a chemist.
When she gets a job, she expects her salary will start at something like $40,000 to $60,000. She wants to get a townhouse when she gets out of school, to avoid renting.
"Are my goals realistic?"
Meantime, she works as a chemistry tutor and on summer internships. She made $5,000 this summer in food maker Nabisco's analytical lab, testing complaint samples to see what was wrong.
She drives a '97 hand-me-down Cavalier that's pretty reliable. She figures it's good for at least another five years.
"Are my goals realistic?" she asks. "Where should I be saving? How much should I be saving?" She wonders if individual stocks are such a good idea now she's heavy into school.
"Now that I'm at school and don't have the time to read all the articles, maybe a mutual fund would be better," she says.
What the planners say:
"Jen Scricco is an individual who should be cloned," Kim Dignum, a certified financial planner with Fort Worth, Texas-based Dignum Financial Services, says. "She is young, ambitious and very astute when it comes to her finances."
Her net worth of around $35,000 "is a very strong position for someone her age." Dignum also credits the way Scricco has managed to keep her finances in order with scholarships to cover her college costs, while setting aside money for fun such as her swing dancing. This gives her a good balance, the planner explains.
She thinks Scricco is right to reevaluate. Dignum advises her to move the $2,500 in passbook savings into a money-market account, which would give her a higher interest rate while still letting her write checks off the account.
Ideas for the CD money
Dignum would reposition the $15,000 in CDs, too, breaking it into thirds. She would put $5,000 in a six-month CD and $5,000 in a 12-month Treasury bill, leaving $5,000 to invest.
This would accomplish several things. It would still leave Scricco with more than the $2,500 in her money-market account to tap for emergencies. After exhausting that, she could tap the CD or T-Bill money if, say, her car had a total meltdown and she had to buy a replacement.
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Bruce Heling, a certified financial planner and president of Heling Associates Inc. in Brookfield, Wisc., says it wouldn't hurt to "goose" the emergency-reserve fund to $5,000.
"Be advised that as cars age, they tend to consume more maintenance dollars," he says. If she's lucky and doesn't need to spend the money on repairs, it could then serve as a down payment on a new car.
But Dignum's repositioning would put Scricco's money to work a little harder, stagger maturities and diversify her investments. Dignum notes that she is very heavy in small-company stocks, with a little under a third of her money there.
"Given her age and time horizon, it is acceptable to be this aggressive," the planner says. But Dignum recommends she put $3,000 of the $5,000 to invest in a large-cap stock, through a dividend reinvestment plan. The remaining $2,000 Dignum would direct to a mutual fund investing outside the United States, to round out her portfolio.
Broadening her horizons
Heling is alarmed that two-thirds of Scricco's money is in the health-care sector. "She probably understands it better than most sectors," given her interests, he concedes. And it has good growth prospects.
But any sector is going to be volatile, he continues. "A wise person once said, 'Don't keep all your eggs in one basket.' Another said, 'Go ahead - keep all your eggs in one basket, but watch that basket very carefully!' "
Scricco seems to know she should be leaning toward mutual funds. Heling agrees. He thinks she should use a "core and explore" strategy, with one or two diversified growth funds at the center of her holdings, at least 60 percent.
She could then add sector funds like the Warburg Pincus fund she owns. Heling suggests Scricco look at information-technology and financials. But he says she shouldn't have more than 15 percent in any one sector.
Even playing sectors might take more time than she has while studying, in which case she should stick with diversified funds, Heling says.
A hearth is in her grasp
Scricco's dream of purchasing a modest home when she gets out of grad school "is well within reach," according to Heling.
Even assuming 5 percent inflation, higher than the current rate, a $70,000 home now will likely only cost $85,000 in four years. If she puts down 20 percent and mortgages the rest with an 8.5 percent, 30-year mortgage, her annual payments for principal and interest will be about $6,300, Heling calculates.
She will need about $17,000 to put down, and another $1,700 for closing costs - which Heling pegs at 2 percent of the purchase price. In other words, her tab for a house would be $18,700. She should easily be able to afford the mortgage if she's right about her starting salary, Heling says.
He points out that her current CD holdings will be able to furnish her with the necessary funds for the house. You can get a two-year CD with a rate slightly above 7 percent right now, he points out, "so her odds are pretty good."
She doesn't have to risk it at all
Heling agrees with Dignum that Scricco could get more aggressive with her CD money. Instead of a T-Bill, he would suggest a diversified portfolio of corporate bonds, with 75 percent to 80 percent in high-quality issues and the rest in a high-yield bond fund.
But she will want to draw on the money in a fairly tight timeframe - four years. So Heling would reposition that bond portfolio in two years, anyway, moving it back into short-term bonds or CDs.
Is the increased risk of more aggressive investments worth it? Probably not, Heling says, if Scricco is serious about buying a house right after grad school.
"Whether by design or accident, Jennifer currently holds investments that are not inappropriate to this goal, and in about the right amount," Heling writes. She might take interest penalties to reposition her CDs, too, he points out. "She shouldn't be faulted for simply maintaining the status quo with this part of her portfolio."
Dignum points out that, under her plan, Scricco should be able to fund the down payment from the $10,000 in the CD and short-term T-Bill.
Setting herself up
Both the planners suggest that, if she's able to, Scricco divert $2,000 into a Roth IRA. Scricco says she wants to learn more about IRAs, and the Roth tax breaks are well-suited to her, they say.
Heling points out that even if she can't afford that, she could switch $2,000 of her taxable investments into a Roth, assuming she earns that much.
Dignum recommends placing the Roth money in a non-U.S. fund, too. "This will be the final balance to her asset allocation," she says.
The Roth would compound without affecting her current taxes, and then be tax-free when it comes time to withdraw it, the planners point out. Some long-term planning like that will help with her hazy plans, such as possibly having kids.
"Jennifer has an excellent start on the road to financial security," Heling says. "I hope she builds on the good habits she has displayed to this point."
* Disclaimer
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