Going Clubbing

Laugh, Eat, Make Money–What Could Be Better?

By Kara Stefan

An investment club works like a mutual fund, only with the following differences:

• You know all the other investors.
• You do your own research and stock selection.
• It costs less since you’re not paying a money manager.

But belonging to an investment club entails certain responsibilities. You have to commit an upfront flat sum contribution and/or a monthly contribution of anywhere from $25 to $75. You agree to conduct a portion of the ongoing stock research. And you agree to meet regularly with your club members. Some clubs meet once a month; others once a week.

For this reason, it’s a good idea to join an investment club with people you like, and with whom you enjoy spending time. That’s why a lot of women gravitate towards all-women clubs–generally considered warm, engaging networks.

Sandy Beckwith, a Rochester, New York native who’s a member of an all-women’s investment club there, says her group is very supportive and nurturing. “Whenever anyone has a personal crisis, we take a few minutes at the beginning of the meeting to deal with it–even if that means having a good chuckle about it,” says Beckwith.

Although she’d never purchased a stock before joining the club three years ago, Beckwith says the club has given her the tools, knowledge, and confidence to take charge of her personal investment portfolio.

“Using what I learned in the club, I now take some of my IRA money and invest it in ‘hand-picked’ stocks,” Beckwith explains. “The total value of this part of my IRA portfolio has increased by more than 50%! Even my broker is impressed.”

Rise in Popular ity
Investment clubs are largely responsible for the increase in women investors in recent years. The National Association of Investor’s Corporation (NAIC) reports that women comprise nearly 70% of its total membership, and its number of registered all-women’s investment clubs has increased by 25% over the last 10 years.

Perhaps an even more impressive fact about all-women’s clubs is that in recent years, sufficient data has been collected to indicate that all-female clubs excel at investing. Check out these average compounded annual lifetime earnings rates from 1998:

• All-women clubs: 23%
• Coed clubs: 21%
• All-men clubs: 19%

According to the NAIC, one reason for this out performance is that since women are traditionally the consumers of the household, they are in the habit of looking for quality goods and services at a fair price. A habit and skill set that are easily transferable to the stock market.

Natural Investors
Women tend to be excellent students when approaching a new subject, and investment clubs mimic a kind of “study group” environment. “My take on it is that women can be more thoughtful and less reactive,” Beckwith explains. “We tend to do the research and due diligence on the stocks we select, and we invest for the long-term. We’re not looking to buy-sell, buy-sell, buy-sell.”

Beckwith’s club, which goes by the name “Tyche Fourteen” (Greek translation: Goddess of chance and good fortune) consists of a lawyer, horticulturist, mother, teacher, saleswoman, professional counselor, and two graphic artists, among others.

“There were people, like me, who had never bought a stock before,” says Beckwith. “And there were all different levels of understanding about the world of investing.”

One stock Beckwith is fond of is The Limited Too, a spin-off from the women’s clothing retailer. Her interest was motivated by her own spending habits. “I spend way too much money there for my daughters,” she says. “If I do, I figure so must every other suburban mom.”

Investment clubs generally divide up research responsibilities among all members, assigning either a stock or an industry sector for each member to research and report on at each meeting. Popular resources for analyzing potential investments include:

• Value Line, a stock rating firm that publishes its research and can be found in most public libraries.
• Edgar.com, a site sponsored by the Securities and Exchange Commission (SEC) that publishes required filings by public corporations.
• Smart Money, Money, Business Week, Fortune, and Worth magazines.
• The Wall Street Journal.

Women’s Social Circle
All told, the best part about joining an investment club isn’t making money, it’s the camaraderie and welcoming atmosphere. Beckwith comments that each member has an equal opportunity to lead and share in discussions.

“Plus, we take turns bringing dessert and can talk about anything–there’s no topic that leaves women uncomfortable…nothing taboo,” Beckwith muses with a chuckle. “We spend a lot of time laughing at our meetings.”