01:00 AM EDT on Sunday, July 23, 2006

BY KARA MCGUIRE
Minneapolis Star Tribune

MINNEAPOLIS, Minn. -- Each morning, Kyle Henderson rolls out of bed and logs on to his computer. The 20-year-old is not downloading music, instant messaging or checking sports stats. He's rethinking his stock portfolio on sites such as Yahoo Finance and Bloomberg.

Henderson, who has been peeking at newspaper stock listings since elementary school, opened an online trading account on his 18th birthday. Since then "it's taken over my life," he said. He checks his portfolio's performance at least five times a day.

Henderson isn't a buy-and-hold investor who picks stocks to own for the long haul. He sometimes buys stocks and sells them days later.

That behavior was common during the late-1990s tech boom, when the bull market made it seem as though anyone could make money. But Henderson is a different type. He doesn't even like tech stocks -- not since he was burned by Lucent Technologies' crash.

While many investing experts consider market timing and frequent trading to be no-nos for individual investors, Henderson's day trading could be classified as career development. He aspires to be a stockbroker when he graduates from the University of Minnesota's Carlson School of Management in December 2007.

Stock picking is also a hobby. He has a friend who once told him, "You approach investing like I approach sports," Henderson recalled. Most hobbies cost money; Henderson's could earn him some.

Henderson's $7,500 portfolio typically consists of three or four stocks he holds for a short period. He does wish he'd kept some stocks longer -- Starbucks and Apple came to mind. But it's not his style. "I love buying stocks that are going to move, not blue chips you can sit on until you die," he said.

When picking stocks, this two-time second-place finisher in a college stock portfolio contest looks to fundamentals such as the price-earnings ratio, beta, 52-week high and dividend payouts to guide his decisions.

But he also considers product launches and market buzz. For instance, he bought Apple stock when the company announced its plan to release a video iPod. He later sold it and just purchased it again "because it's gotten battered as of late" and is essentially on sale, he said. He also has an oil stock and two real estate investment trusts.

Henderson is more knowledgeable about stocks than your average 20-something from Granite Falls. His father, an insurance agent, and his mother, an elementary school worker, also are interested in investing. In fact, their investment club is competing with Kyle's online portfolio to see who can earn more in this tough market. Interested in stock trading? Henderson doesn't want you to make the same mistakes he's made. So he shared these tips.

Don't get greedy -- In financial decisions, psychology and emotion are constantly dueling with common sense and caution. Let price targets be your guide. Decide how much money you're comfortable losing and vow to sell a stock when it goes down by that amount. Set a target on the high end, too. "I've watched stocks lose everything," he said.

Be diversified -- It's a tip that's helped Henderson's portfolio weather recent market volatility. His portfolio is up 5 percent this year. By comparison, the Wilshire 5000 -- the broadest index of U.S. stocks -- is down a half percent so far. Being diversified is important because different industries are best performers in different years.

Watch the fees -- Henderson's first brokerage account charged $30 per trade, which can make a big dent in a frequent trader's returns. Now he uses an online trader that charges $7 a trade. A relatively new site, http://SogoInvest.com, offers trades for $3 or less.

Have cash on hand -- If you have a little money set aside, you can quickly get into stocks you've identified as good buys. "The market had a nice little run, and then the geopolitical scene decided to erode some of Wall Street's optimism," he said, explaining his reason to sell an ethanol stock and an oil stock to free up more cash. "I thought, because of this instability in the markets, that it looked like a pretty good time to cash some things out and try to pick up some bargain deals."