- The Washington Times - Monday, May 28, 2001

The region's investment clubs are still up and running and doggedly trying to learn to play a market that by now has taught them how to lose.

When stocks came down, after years of growth, investment club members who had grown accustomed to prosperous times had some adjusting to do.

"That frustrated people to have eight, 10 years of economic expansion where it's hard not to make money and suddenly things go back to normal … a lot of the newer investors hadn't experienced that and I think it was disconcerting to them," says Mary Jo Clark, a director of the National Association of Investing Clubs' local chapter.

She said there has been a drop in club membership, but investment clubs are still popular.

These clubs meet monthly in small groups averaging a dozen or so members who pool their money and invest it in the stock market.

The clubs reached the height of their popularity less than two years ago, when nationwide membership in the association numbered 37,129 clubs. The NAIC had an enrollment of 36,654 clubs at the end of 2000.

This drop follows a decade of phenomenal growth. In 1990, there were just 7,085 investment clubs in the nation.

Locally, there are 1,029 clubs, down from 1,145 in 1998, NAIC says.

In March a year ago, both the Nasdaq Composite Index and the Standard & Poor's index reached record highs before beginning their fall. Today, the markets are slowly rising, but still remain behind.

The Nasdaq is more than 50 percent off its high of 5,048.62 and Standard & Poor's is down 15 percent off its best finish of 1,527.46, while the Dow Jones Industrial Average, after eight long, painful months, has finally climbed back above the 11,000 mark.

The downturn scared away some investors, but many others are riding out the pressure and still pouring money into the markets.

"We haven't earned as much as we would like in a couple of months, but we're still ahead of Nasdaq," says Pamela Mason-Baker, a member of the BOTH Club, short for Bucks On The Horizon, an all-women group with a $15,000 portfolio that was founded in 1996.

Investment clubs tend to have an initial investment fee of several hundred dollars as well as a monthly fee of $30 and up. Some groups trade online, while others go through a broker.

For the sake of learning, investment clubs never cash out on their gains. Instead, when they make money they reinvest it and increase their portfolio and net worth.

Generally, they put their money in old, reliable companies a strategy encouraged by the NAIC though some clubs elect the short-term, risky approach.

BOTH, for instance, holds shares of 14 companies, including Home Depot, Oracle, United HealthCare and Pfizer.

"This club has been an excellent forum for me to learn about both the stock market and to get a better sense of how it drives our economy," says Ms. Mason-Baker, 39, who has no previous experience investing.

People join investment clubs for different reasons.

Jenny Ramarui, 39, joined RICH (Research and Investment Club Holdings) because she wanted to avoid going through what her mother experienced.

In the 1980s, the stockbroker her mother worked with put her retirement investments in California real estate. The small fortune was lost when that market collapsed.

The all-women RICH was founded in 1997 and its net worth today is about $17,000. That's $5,000 more than its investment, but pretty low considering that at its high a year ago the club was up 2.5 times its investment.

"We are not used to seeing these stocks down," says Christina McDougall, one of the group's two treasurers. "Overall, if you look at the valuation statement of our holdings, we're still in the money."

RICH met recently in a small church in Arlington during after-work hours.

After some time for tale-telling and catching up on each other's lives, the dozen women went to work. The minutes from the last meeting were read out loud. Ms. McDougall talked about the new shares the group acquired; she said RICH has bought more Cheesecake Factory shares, and that Starbucks had a two-for-one stock split. A discussion on stock splits followed.

Later, Ms. Ramarui gave a short and amusing book report on the story of Harley-Davidson. Which wasn't as much fun as she thought it would be, she told the group, waving the thick, hardback book in the air.

To join RICH, members put down an initial fee of $600. If a member wants to leave, she is paid out her share. Otherwise the money remains untouched, growing or shrinking depending on the market's conditions and on the group's ability to make sound investments.

Early on, one thing that contributed to the popularity of investment clubs was the story of the Beardstown Ladies, or the Beardstown Business and Professional Women's Investment Club.

Made up from women over the age of 70, this mid-1980s group eventually wrote a book about the success of its investments through the private club.

"When the Beardstown Ladies came out, that gave a big boost to the investment club movement because it helped promote the idea," Mrs. Clark says.

The older women's club also prompted many women to join clubs, which had been mostly male-oriented. NAIC estimates that today women, including those in coed clubs, make up 67 percent of their membership, compared with 10 percent in 1984.

All-women groups are also doing better. Last year they posted gains of 19.25 percent in their investments. That was better than coed clubs, which gained 19.19 percent, and all-male clubs, which gained 18.73 percent, according to NAIC.

Once lucky

Don Lucas has been investing for nearly 50 years.

One of his most memorable experiences dates back to Nov. 10, 1973.

It was in the morning, he recalls. Tired of living in a small Georgetown apartment, he decided to buy a house. So Mr. Lucas called his broker and asked him to cash out his investments. He got his money hours later and put it toward a down payment for a home in Arlington.

That same afternoon the stock market tanked.

"I wouldn't have had any deposit if I hadn't cashed out," says Mr. Lucas.

Luck saved him that time. But not the next.

When the market crashed in October 1987, his investments suffered. But he stayed in the market, riding out the downturn with a long-term perspective.

This philosophy is what Mr. Lucas teaches the members of the Dwyer Investment Club, which he started 15 years ago with 11 other men.

"What I learned from them is what I apply in my own portfolio," says Mr. Lucas, 73, who at one point served as president of the local NAIC chapter.

His club with investments like Johnson & Johnson, Home Depot and FedEx has a net worth of over $100,000. Its value last year rose 36 percent. That's better than the market's overall performance, but lower than the 45 percent the group's worth grew the year before.

Originally all-men, the Dwyer Investment Club allowed a woman to join about two years after it was started.

"I forget how it happened, but we took her in, and she was very good, and we took another woman later," recalls Mr. Lucas. "It was an icebreaker."

Today the group's membership is evenly split among men and women; two of its members are father and daughter.

There's no deposit required to join this group; it grows solely from its investments, and from the $50 monthly fee its 14 members contribute.

Getting started

NAIC, a nonprofit organization, provides start-up investment groups with a suggested structure. But as they develop, groups add their own twists.

At BOTH, for instance, rather than randomly having members do presentations on potential investments, women pair up and together research entire sectors. Ms. Mason-Baker and her partner study biotechnology stocks.

"We found that we are more effective if one or two women can work on a company," she says. "We can do more thorough research that way and be assured that our portfolio is more diverse."

"If a woman presents a stock and the group votes to purchase stock, we vote on how many shares [to buy]," says Ms. Mason-Baker. "That individual is then responsible for monitoring the stock and periodically do research and recommendation of when to sell."

Usually BOTH sells a stock after it has doubled and the group has made back its initial investment.

Another of BOTH's rules is to make a risky investment once in a while. This is a non-NAIC rule; NAIC recommends that clubs invest in companies that they can trace back and predict growth for.

"Our philosophy is that this is an opportunity to invest in companies that you may not choose for your own personal portfolio," says Ms. Mason-Baker.

When groups aren't debating what stocks to buy and sell, they go to courses on investing, or invite speakers to their meetings.

"It's all part of the learning process," says Ms. Mason-Baker. "I find that speakers are invaluable. Most recently we had the father of one of our members visiting from the West Coast and he talked about his experience of doing an [initial public offering] and we all had questions about how you do an IPO, what you do during an IPO, and how do you value your stock


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