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 Popularity
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 outperformance
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."
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