In early 2000, the stock market literally exploded with activity. The Nasdaq Composite Index, a standard market barometer, soared above 5,000 for the first time in its history. On Wall Street, trading volume approached 2 billion shares a day. Dividends rolled in. Brokers and investors alike had plenty to smile about.

Among those grinning was a group of eight Johns Hopkins undergraduates, the founding members of the Marshal L. Salant Student Investing Team, who had just learned they were to receive the first $20,000 installment of a pledged $100,000 donation with which they could invest as they saw fit. The program, which officially began in 2001 and is funded through 2005, aims to provide undergraduates with the real-world experience of investing and the university with money for scholarships.

The executive committee of the Marshal L. Salant Student Investing Team, from the top: David Yu, Kern Kapoor and Erin Silverman. The group started its portfolio in 2001.

One of the original team members, junior Erin Silverman, today speaks wistfully about the "bullish" days of her freshman year. Silverman said that back then both she and her fellow investing team members oozed with optimism and visions of windfalls aplenty. Stock market, they said, here we come.

"The mentality of the students in the beginning was that we were going to make a ton of money, a ton," said Silverman, who is majoring in history. "We figured, why not? We're all smart. The market is hot."

They still might hit it big, but the team had to take its lumps first.

After its peak on March 10, 2000, the stock market entered what has been dubbed one of the worst bear markets in history. Needless to say, it's been a humbling three years for these fledgling investors.

The investing team was established in 2000 with a donation from Johns Hopkins alumnus Marshal L. Salant, a School of Engineering graduate and currently a managing director at Morgan Stanley. Salant also was largely responsible for organizing a two-day field trip for undergraduates to Wall Street, now an annual staple of intersession programming.

John Wierman, a professor of mathematical sciences in the Whiting School of Engineering and one of the investing team's three advisers, said that Salant's intention in creating this investing program was to prepare students for careers in finance.

"He wanted to provide students with a real learning experience. Rather than playing with stocks on paper, these students are making and losing real money, which gives them more of an ownership of the portfolio," said Wierman, also director of the school's W.P. Carey Program in Entrepreneurship and Management. "They really learn what it's like to run a portfolio as a manager and, because of that, take it very seriously. Also, because the students go through such a careful interview process to be selected, they are also learning something about what they will go through when trying to find a job after school."

The program is open to all undergraduates in the schools of Engineering and Arts and Sciences. Members participate on an annual basis. Applications are submitted each spring, for both new members and existing ones who want to continue.

Each academic year the group receives an additional $20,000 until the total donation of $100,000 is complete. The money goes to the Office of the Treasurer, which deposits it into an online brokerage account.

Starting in the spring, the team members meet once a week to confer about what stocks and bonds they want to buy and what existing portions of the portfolio they want to sell. A member proposes a commodity to buy or sell, defends his or her choice and then the group votes on the matter. A majority is needed to approve a trade, which is then written on a slip, signed and faxed to the Treasurer's Office to be executed.

The first 5 percent of profits from the team's portfolio is put into an account for undergraduate scholarships. All proceeds beyond the first 5 percent are reinvested. To date, the program has been infused with $60,000 in donated funds and has seen a negative return of nearly $7,000.

"To say the least, the market has not been doing as well as in past years, but it's finally starting to pick up," said Silverman, who is one of three executive members on the team. The others are Kern Kapoor and David Yu. "Overall, we're down, but we haven't been performing as terribly as other investors," Silverman said. "It would be nice to make a lot of money, sure, but the main goal here is to learn. People are certainly not thrown out if they make a misguided stock pick."

In addition to Wierman, the Marshal L. Salant Student Investing Team is advised by Carl Christ, emeritus professor of economics in the Krieger School, and Srinivas Pulavarti, director of investments for the Office of the Treasurer.

Pulavarti said the team's lackluster financial fortunes to date are much more a product of the market's downturn than of specific investment choices.

"[The students] are no different than 99 percent of professional investors. They have not taken an inordinate amount of risks," said Pulavarti, who advises the university treasurer on endowment management.

Pulavarti said a common mistake of inexperienced investors is not knowing when to sell, a lesson the team is still learning.

"Selling is a discipline that is not emphasized enough in investment seminars. Most learn only through practice," he said. "Buying stocks is the easy part. How to decide when to sell your shares is a very important, and harder to grasp, aspect of managing a portfolio. Being successful is also a matter of proper risk management and diversification, making sure you don't put all your eggs in one basket. These students are learning about all these nuances. I feel this program is an invaluable and great opportunity."

The current Marshal L. Salant Student Investing Team consists of 11 students who have opted to break off into four subgroups, each of which is responsible for managing two economic sectors. Silverman and her colleague, for example, monitor real estate investment trusts and consumer noncyclical industries. Silverman said she tracks her sectors by subscribing to various e-mail newsletters, regular perusal of The Wall Street Journal and simply keeping her "ears open" to industry noise.

As for what commodities the team can purchase, the students are held to the same restrictions as the university endowment managers:

No margin accounts or short selling.

No trading of options.

No single equity can be more than 10 percent of the portfolio.

No purchasing of individual bonds below investment grade.

Stocks purchased must be traded on U.S. exchange only.

No tobacco companies.

"For whatever reason, Philip Morris always seems to be the first stock that people want to buy," Silverman said. "But the no-tobacco-companies clause is really the only ethical restriction we face. As far as individual stocks go, we are pretty free as to what we can buy."

Companies in which the group has invested include Amgen, Dow Chemical, Microsoft, Southwest Airlines and Yankee Candle.

The group also hosts guest speakers, who have included a broker from a major financial services firm and the director of a large mutual fund organization.

Silverman said that through the ups and downs she has learned much about investing and the financial world.

"It's really interesting stuff when you get right down to it," she said. "I've learned a lot about careers in finance, and this experience has inspired me to work in this field after graduation."

As for the fund's future growth, Silverman said she remains optimistic.

"The goal is that 20 or 30 years from now there are going to be major dividends, all depending on how the market goes, of course," she said. "Some [other university's] student-managed funds have $200,000 to $500,000 in them, and some are up around $1 million. It's all about patience; these things over time can really grow."

They say every downturn has an upside. This group is counting on it.