Investment clubs retain faith in stocks
By James Prichard
HASLETT, Mich. Don Clark's occupation is autoworker, but his preoccupation is investing.
And the recent corporate accounting scandals and slide in the Dow have not done much to dim the enthusiasm he and members of other investment clubs have for stocks. Many see the downturn as a buying opportunity.
"I've learned some valuable lessons, as I think most investors have," Clark says. "But I haven't lost faith in the system. You just need to understand what's going on."
Investment clubs usually consist of people who meet in small groups, often monthly, or chat online to study and discuss investments. They pool their money and decide by a majority vote whether to buy or sell a stock.
Clubs enjoy varying degrees of success.
The best known investment club of all, the Beardstown Ladies of Beardstown, Ill., got into legal trouble after writing books claiming their investments had returned an average of 23.4 percent from 1984 to 1993. The club later revised the figure to 9.1 percent well below the 15 percent annual return of the overall stock market, with dividends reinvested, over the same period.
The National Association of Investors Corp., a nonprofit group founded in 1951 and based in the Detroit suburb of Madison Heights, claims a membership of 31,349 investment clubs, with an average of about 11 members each. Women make up 69 percent of the members. The median member age is 53.
The NAIC discourages speculation and day trading in favor a more steady-as-she-goes approach. It recommends regular and long-term investment, stock dividend reinvestment and investing in blue chip companies.
Jim White, who heads up a Grand Rapids-area investment club as well as a local NAIC chapter, says the value of his club's investments was around $2 million until the market started its slide a couple of months ago. Its value has dropped about 20 percent since then.
But "we've seen this time and time again," says White, a professional investment adviser. "If anything, this is a good time to add new money, fresh money, and take advantage of the situation and the psychological hyperbole happening right now."
He says the accounting scandals at companies like Enron and WorldCom shouldn't dissuade people from investing.
"There are more than 16,000 publicly held companies and we've heard from, what, maybe 12 companies that have been less than honest," White says. "That's just the nature of the beast when it comes to investing."
"Bear markets happen, but eventually the bull comes back," says LaVonne Raney, 86, an investment club president and retired homemaker who lives in the Columbus, Ohio, suburb of Upper Arlington. "If you have faith in the stocks and the people (running the companies that) you studied for long time, you don't sell. You buy at reduced rates, and that's what we do."