How much do you know about the stocks you own? Can you list them? Do you know why you own them? What was your rate of return last year?
For many women—lots of men too—investments are low on the list of interesting things to spend time thinking about. You have an advisor for that, right? Or a 401(k) or lottery tickets. And the recession made it even more painful to examine our statements and think about how and why we invest.
But what if you added in a group of friends, a monthly meeting and maybe a glass of wine? Suddenly, investing is a little more interesting. Since 1995, Barbara Potter and 15 other women have been meeting regularly to pool money and invest in stocks. The Share ‘n Share Alike group was started by Julie Fox and Kathleen O’Brien, both of Glenview and both interested in learning more about financial systems. The two women invited a diverse group of friends to form an investment group and they’ve been together ever since.
The women’s goal from the beginning wasn’t to get rich, but to educate themselves.
“We’ve had some great years and some not-so-great ones,” says Potter talking about the group’s annual returns. “But our intent is to learn about stocks and no matter what, we always have good conversations about investing.”
In making that their goal, this group has been particularly successful, says Bill Kasten, a partner at William Blair & Company.
Other groups may be more results oriented, setting a particular financial benchmark they’d like to achieve—outperforming the S&P 500—or their investments may be goal oriented—a group of young parents who are saving for their children’s education. Some groups form around shared beliefs and only invest in corporations whose ethical and social standards match those of the group.
According to Sara Pfaff, a private wealth manager for UBS, success for a group hinges on the same basic principles as success for any investor: Define your goals.
“A group needs a formal, written mission statement that spells out the philosophy, goals and timeframe,” says Pfaff. “Otherwise, the group will chase down a lot of side routes and never get to their goal.”
Once a mission statement is in place, a group needs to set up a few other administrative procedures:
- Form a partnership with a tax ID number
- Set up bylaws that outline monthly dues and procedures for cashing out members
- Agree on an initial payment and monthly dues
- Elect officers
- Set monthly meeting and member requirements
The administrative set up is similar to that of any new venture—the up front work is a small hassle but it ensures that the future workings run smoothly. There are lots of online resources that can help with the set up.
After the group is organized, the fun begins. It’s time to start suggesting stocks and researching companies’ potential. Typically, most groups ask each member to investigate and report on one stock. Share ‘n Share Alike members each follow one stock and give a brief report each month. Members also suggest and research new stocks, invite guests with special expertise to speak and research industry trends.
“At a recent meeting two people presented on Coke and McDonalds,” says Potter. “We’re looking for sectors with potential and comparing leaders within categories.”
When presenting, the member is expected to know the company’s earning potential and have statistics to back it up. But Potter is quick to add that the information is easily accessible and that the women have learned how to interpret price/earnings ratios and other measures of value as they’ve talked and compared stocks.
This research and reporting is one of the strengths of an investment group, according to Pfaff. Hearing a variety of opinions is important, as is the education that comes from following a company or industry.
“We’re a work in progress,” says Potter, speaking about the group. “We have good conversations about stock and we are very intent to learn about investing.” With that as their goal, this investment group is guaranteed to always have positive returns.
Resource List:
University of Nebraska: Guide to Starting an Investment Group
National Association of Investors Corporation: Nonprofit group dedicated to investment clubs
Bivio: Online investment club tools
Chicks Laying Nest Eggs: Experienced Women’s Investing Group
Books:
In Search of the Green: How to form your own Investment Club, when you don’t know from beans
by Patricia Edwards
Starting and Running a Profitable Investment Club: The Official Guide from The National Association of Investors Corporation
Revised and Updated by Thomas O’Hara and Kenneth S. Janke Sr.
