Wall Street Risk
John Shoaf said he wanted to pursue the most intimidating career he could think of.
So he tried Wall Street on for size.
A previous USU student, 25-year-old Shoaf said he moved to New York City to find out what he could really do. It was a challenging process, he said, especially since most investment banks only recruit from Ivy League schools. But after more than 100 informational interviews with different companies, he said he found a job at a Wall Street firm called David N. Desutch and Company. Now he is the investment banker and senior associate, and Shoaf said he is living the dream.
Shoaf, originally from American Fork, Utah, said he advises CEOs and owners of large corporations with specific finance issues. And he said he absolutely loves it.
“I love it because I get to see the world from a top-down perspective. I don’t just learn about finance, I also become an expert on a broad array of industries,” he said in an e-mail interview.
For example, Shoaf said he closed a merger deal this month that created the world’s largest manufacturer of industrial bakery equipment. Another time, he helped with the process of selling a consumer products company to Conair. But everything comes with a steep learning curve, he said.
“It’s not uncommon for my director to come in and say, ‘John, I’m meeting with the American head of Toyota in two days, make me an expert on the steel services industry by 4 p.m. tomorrow,'” he said.
Shoaf said this is one example of the fast pace and high pressure of the finance world and shows that in his job, the learning curve never goes away. He helps companies decide if they should sell, buy or merge with others. Shoaf also said he helps companies raise large amounts of money, millions or billions of dollars, so they can grow their business.
Through this experience, Shoaf said he has learned what finance mistakes people make. The first mistake is not tracking where money goes. People seem to know exactly how much they earn, he said, but they don’t know how much they spend every month.
“This is a huge mistake,” Shoaf said. “This is what causes people to live paycheck to paycheck.”
The second mistake is that many people don’t utilize risk or leverage properly, he said. Risk means “putting money to work,” and debt is often referred to as leverage because it dramatizes the effects of risk. An example of basic risk, he said, would be buying some stocks with your own money; leverage would involve borrowing money to buy those same stocks. Since the buyer would be using someone else’s money, that immediately dramatize the effect of the buyer’s risk or reward, he said. Failure to take advantage of risk comes both in never taking a risk in the first place and in taking stupid risks, like investing all of your money in one stock. Shoaf said failure to really make leverage work for you, instead of against you, is either a fear of incurring debt or being stupid with debt.
“Ironically, the fear of failure causes the people to not use risk or leverage in the first place but that’s like saying, ‘I’m too afraid to drive because I don’t want to get in an accident.’ Surely, it would be stupid to get behind the wheel without first learning how to drive the car,” he said.
College students who are not investing today should begin, he said. Although investing can take some time and financial commitments, Shoaf said that, just like life, it’s a trade-off.
“Isn’t one less hour of Guitar Hero every week a fine exchange for financial literacy and life-long prosperity?” Shoaf said. “Isn’t one less date per month worth the ability to invest a few dollars?”
Shoaf said if a student only invested $50 per month, they would have $3,000 by the time they graduated from college. Students should also invest, he said, because the sooner they invest, the faster their money grows.
“Students are students because they want to learn, right?” he said. “Students should invest to learn how they individually react to risk and leverage (and) learning to ‘stomach risk’ is important, not only for investing, but for life in general.”
A mutual fund is the best investment vehicle for most students, he said. Stock picking, however, is generally a bad idea for most students. A great way to learn about investing is to set up an online brokerage account and execute your own trades, Shoaf said. But individual stocks, he said, should only be a small portion of a student’s investment portfolio.
Now, because Shoaf managed his finances well in the beginning, he said he can afford to do things most people his age can’t, like traveling the world in 107 days, which is what he plans to do at the beginning of May.
Try that on for size.
brittny.jo@aggiemail.usu.edu