Twin Cities Business, Personal Finance, March
2008, By Jeff Dekko
Club Money: Investment clubs are an education
in researching, analyzing, and buying stocks—regardless
of returns.
There’s something about riding a bike on the
weekend that helps a person better appreciate
what it takes to compete in the Tour de France.
Or about tossing a football in the back yard,
then watching Bret Farve lace one to a tight
end.
Just ask Diane Munson and her cohorts in the
Way North Investment Club. Munson, of St. Francis,
Minnesota, has been meeting with the nine members
of the all-women club since 1998, about a year
after the club was formed, and she and her fellow
club members can probably say they have a modest
appreciation of the effort it takes to manage
money for other people.
It just so happens that the ladies of Way North
have been devoted enough to their task to land
their club on the annual list of best-performing
investment clubs by BetterInvesting (formerly
the National Association of Investors Corp.)
and Value Line, according to the 2006 Value
Line Awards competition and BetterInvesting's
annual investment club survey. Their compound
return since the club’s inception in May, 1997:
14.1 percent.
The annual survey, which began in 1960, provides
a benchmark for performance among BetterInvesting
investment clubs across the country. To make
it to the top of the list is no small accomplishment.
In the greater Twin Cities, BetterInvesting
lists 69 clubs and 97 individual members. In
Minnesota: 416 clubs, 488 individual members.
“We have a really good time,” Munson says.
“It’s a very diverse group, from all over the
metropolitan area. It has helped a lot of our
members, some of whom are unmarried or single
moms and didn’t know a lot about investing when
they started. It has helped them do a better
job managing their 401(k)s or other family investments.”
An informed investor is a better investor,
which is why I like investment clubs. I’m part
of one, and as with Diane, we have a great time
– and learn some things along the way.
One important point: an investment club won’t
make you rich. After 10 years of returns and
monthly contributions of $50 per member, Way
North’s account is up to about $60,000. Split
that 10 ways, and it’s not going to fund your
retirement. What it will do, however, is feed
your brain. Diane, the club’s vice president
of education, tells me that the Way North ladies
assiduously follow the BetterInvesting guidelines
for how to select stocks and evaluate companies.
That’s a great way to learn about investing
and about business in general. And following
the guidelines laid out by BetterInvesting is
a good way to start your club; Diane recommends
that anyone thinking about that should first
contact BetterInvesting: “They have all the
tools to get you started,” she says.
Then, find the right partners.
“All of our members are really interested in
learning,” she said. “We all take an active
role. One member is responsible for researching
each of our stocks, and we pretty much ask all
the questions about the company that the BetterInvesting
guidelines suggest.”
Not only should your fellow club members be
willing to put in the time, but they also have
to be good for the financial commitment. Way
North automatically deducts contributions to
their fund from members’ checking and savings
accounts, including a sum to cover BetterInvesting
dues, their annual tax return (the club files
a return and each member receives a K-10 report
for their personal taxes) and incidentals.
Over the years, she said, the club has hit
any number of home runs, but they have also
had their losses. The group holds onto the companies
for a long time, resisting the urge to take
quick, short-term profits.
It’s that kind of discipline that can help
any investor weather the ups and downs of the
market and to build true wealth over a long
period of time. A club like that puts your feet
on the pedals and forces you to muscle that
bike up the hills when the going gets tough.
And that’s a good thing.
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