In the late ’80s and early ’90s, a group of elderly women came to the forefront of the investment world because they had formed an investment club called Beardstown Ladies. They were not the first or the only investment group, but they surely became the most well known, writing a best-selling book that included stock tips and recipes!
Eventually accounting irregularities were discovered, their returns regarded as less than stellar once the numbers were accurately crunched, and the Beardstown grannies faded into much desired (on their part) oblivion.
In the meantime, partially because of the popularity of these women and their desire to see other moms and grandmothers learn about investing in the stock market, investment clubs began to spring up everywhere.
I myself still run three clubs formed as a result of the influence and the excitement of the Beardstown, Illinois group. At one time, I managed five groups, including one at my church of around 60 plus people. (Unmanageable, as it turned out, so it soon dwindled to a committed dozen or so.)
What is an investment club and how can it help you be a better investor in the stock market? Think of this kind of club as a group of people who gather together to make majority-decided investments in the stock market.
Essentially, it is a group of ladies or couples, everyone votes on the amount of money each puts into the account during the year, a brokerage firm is picked for the online trading (with minimal fees) and soon you’re off and running.
The details of how the club operates are open to the decision of the majority of members involved. For example, how you do your research and your stock pitches can be done in various ways, and adjustments can be made as time goes on.
What is the advantage of being in such a club? First of all, they are great fun! If you have a bunch (let’s say 15 members) of ladies who are all interested in learning more about the stock market and how to make wise decisions in terms of buying and selling equities, you have something in common and certainly lots to talk about … along with the usual subjects for a group of women: husbands, boyfriends, children, jobs, fashion. So immediately you have this built-in friendship web, brought together by the stock market. And … you’re all in it together.
As a group, you pool your funds; so, if you each put in $100 (or $25, $50, whatever you voted on) per month, you have $1,500 to work with rather than your less powerful $100. So your buying power increases based on the number of members in the group. Before you know it, you will have a sizeable portfolio of stocks and some cash, so this becomes a fairly easy way to build up your investments.
You also learn from what others are learning. One lady will come to the meeting with good advice about investing in certain sectors because she did some research; this may be research and information you may never have heard on your own. In other words, more people equals more knowledge and you are pooling all of the information for the benefit of all the club members. It is learning, then, to the power of 15 (or how ever many members are in your group).
With the knowledge gained, you can go home and do your own private investing with much more information at hand to use. Therefore, it is almost as if someone else is helping with your homework, your research, your stock picking for you. Why limit the stock pitches that sound good to just your investment club?
Why not use the information to do some sound investing in your retirement account or your own personal accounts, now that you know about the delicious company you never would have heard of before?
It makes perfect sense to be in an investment club for the above reasons. If you are truly interested in forming one, there is much help available online. You can Google “investment clubs” and be sent to all sorts of Web sites geared to walking you through the start up. You can also obtain information and forms on the Web sites of most brokerage houses.
It is more difficult to join an existing club, although it can be done. But a well-established group already has a pot of funds they have been working with for some time, and there are some logistical things to consider. Plus, it is more fun to start your own!
Once formed, if your group of members decide they like one particular online brokerage firm over another, go to the firm’s site and download the necessary applications and paperwork, make your deposit, and the group should be functional within a matter of weeks.
In the next couple of columns, I will outline, in more specific detail, how the club works and how it is to be set up. If you have initial questions, please email me at thesavvygal@thesavvygal.com and I will include it within the next articles.