When Jeff Dietzel, 24, took his maiden plunge into stocks last September, he eagerly used some of his school loans and then gave up health insurance to buy shares of Engage Inc. (ENGA ) and, later, CMGI Inc. (CMGI ) He thought dot-com stocks had dropped so much that he could only make money. Guess again. Since then, Dietzel has lost 60% of his $7,400 investment. In five months in the market, he has had only one up day. "I was trying to be a good adult and invest my money," says Dietzel, a graduate student at the University of Texas at Austin.
Dietzel isn't intimidated--yet--by the first bear market he has ever seen. Like many in the under-30 crowd, he's still convinced that investing is where the action is. As addictive as gambling and potentially a whole lot more lucrative, playing the stock market seduces and inspires today's young adults the same way cars, rock-n-roll, or antiwar protests ignited previous generations. So, even as the battered Nasdaq continues to plunge, young investors don't plan to spurn Wall Street. While some are taking a wait-and-see attitude, others, like Dietzel, plan to buy more stock when they have the cash. Says Joseph S. Burkhart, 24, of Allied Capital Corp. in Washington: "There's got to be sunshine after rainfall."
THE THRILL OF THE GAME. Of course, this generation has never seen a market in which stocks didn't quickly--and seemingly inevitably--bounce back. But if they aren't giving up on equities for now, the young crowd has moved away from aggressive trading. At Datek Online Holdings Corp., which caters to younger investors, clients made three trades a month on average in the last quarter of 2000 compared with five trades a month in the first quarter. "They're trading the same types of stocks. They're just trading less," says Mike Dunn, a Datek vice-president.
A punishing market is making young stockholders take investing more seriously. Paul Timmons, a 31-year-old personal trainer in Rehoboth Beach, Del., concedes the thrill of the game was what attracted him. "I've always bet money here and there on football and basketball, so I figured this was the same," he says. Two years ago, Timmons had never heard of Alan Greenspan, but after just a few months of investing, he was hanging on to the Federal Reserve chief's every polysyllabic word. Within eight months, his $15,000 turned into $40,000. But since last March, those gains have evaporated. He has invested $10,000 in a mutual fund, opened an IRA, and now buys only companies he considers deals, such as Cisco Systems Inc.
Some youthful investors are also learning the value of diversification. David Barry, 29, a commercial real estate broker in Milwaukee, has moved 80% of his net worth into property. Others have simply shifted to the sidelines. Charles Obermeyer, 29, who owns The Best of Everything restaurant in Clayton, Mo., watched his portfolio sink 15% last year and vows he won't invest more until he sees an upturn. "I don't want to buy something I have to dump," he says.
Stockbrokers, once scorned as too costly, are looking useful. Matthew Goebel, 29, a Chicago communications manager whose portfolio has dropped 30%, now talks to his broker three times a week and checks stocks daily. Despite losses, Goebel still owns Dell Computer (DELL ), Nortel Networks (NT ), and Broadcom (BRCM ), and he continues to put new money in the market. "I'm in it for the long haul," he says. He's lucky. He has decades to recover from any mistakes.
By Rochelle Sharpe in Boston, with Geoffrey Smith, Ann Therese Palmer, and Jennifer Merritt