FINANCES TAKING CONTROL

WOMEN’S INVESTMENT CLUBS IN DALLAS ARE GROWING AS FAST AS THE DOW JONES INDUSTRIAL AVERAGE, AND THAT’S NO COINCIDENCE.

WHEN CARLA MORSE JOINED THE ALL-WOMEN Penny Ante Investment Club in 1967, it had already been in existence for 11 years. She felt like a greenhorn. “1 remember somebody had written me a postcard that said where and when the next meeting was, and it also said, so I thought, ’ Bring a hot dip.1 As I was walking up to the house with my artichoke dip, I saw another member, and I said, ’Was I supposed to bring crackers, too?”

Neither, actually. The postcard really said to bring a “hot tip.” Now, 21 years later, although members still tease her about that incident, Morse is a savvy investor, and her club has averaged a 37 percent annual return in the past three years.

Women’s investment clubs like Penny Ante are popping up all over Dallas/Fort Worth. Blame it on the seven-year bull market. Or blame it on the Beardstown Ladies, that charmingly down-home but wildly successful investment club from rural Illinois that became a media sensation. Book clubs are out; investment clubs are hot.

The stock market has more than doubled in the past three years, and so has the number of investment clubs in the United States. According to the National Association of Investors Corporation (NA1C), a nonprofit organization founded in 1951 to promote investment education to individuals and clubs, the number of its investment clubs had climbed from 7.000 in 1990 to 32,000 in 1997.

In Dallas and Fort Worth, there are 527 NAIC investment clubs, with 7,181 members. Nationwide, women represent 60 percent of club members, so there are probably at least 300 women’s investment clubs in this area, representing more than 4,000 members. And that doesn’t even include non-NAIC clubs.

Investment clubs are not get-rich-quick schemes. They’re not really about getting rich at all. They’re about pooling resources (fiscal and mental) to learn more about investing in stocks. Sometimes the dues invested (usually $20 to $30 per member per month) grow and compound nicely. (Most clubs reinvest all dividends.) Others barely break even. They all learn from their mistakes and then can transfer their knowledge and successes into their personal investments.

Most groups, usually 10 to 25 women, are formed as partnerships with carefully constructed bylaws and agreements. If they are members of N AIC, they learn to research, analyze, and compare stocks within industries on a complex form called the Stock Selection Guide (SSG). Some clubs spend as long as six months learning how to read sources such as ValueLine Investment Survey, plug the numbers into this form, and make judgments about individual companies. Most clubs are based on the principles of buying solid growth companies and investing long-term. Once the women begin to understand the concepts, they say it gives them an exhilarating feeling of confidence. They are tired of relying on men for their financial advice.

“I have a really deep feeling that we’ve got to learn to take care of ourselves,” says Marjory McCowen, vice president of the Arlington Moneymakers. “Daddy’s not always going to be there. Husband’s probably not always going to be there. And maybe our children won’t always be there. That’s the main reason we started the club. And sometimes when you go to a broker, he says, ’Oh, that’s OK, dear. I’ll tell you what to do.’That’s why we don’t have any men in our club.”

All-female investment clubs are not new. In 1956, Dell Ellis and the other founding members of the Penny Ante Investment Club were real pioneers. “Our founder’s husband dropped dead of a heart attack at 29,” recalls Ellis. “Two years later, another member’s husband was killed in an airplane accident. So we realized immediately we needed to know more about investing.”

One of the first things these women discover is that there are no easy, sure-fire formulas for picking stocks-and no shortcuts. “Our club, the Woodridge Investment Group (WIGs), has been in existence since June 1996,” says Judy Schreyach of Arlington. “We spent about six months getting our paperwork in order. I don’t think any of us realized that if we followed the NAIC guidelines that we would have to do quite so much work. We might not always use all these methods, but we’re committed to learning them. The computer makes you lazy. You don’t really learn what you’re doing. Until everyone is really good at doing it by hand, we’re not going to invest in the computer software.”

Schreyach warns of the pitfalls of frustration while learning. “We worked and worked and worked, and studied and studied and studied, and we still didn’t come up with anything we wanted,” she says. “So finally, just to get things going, we bought any old thing without doing the paperwork. The first stock we bought, Mentor Graphics, immediately dumped. Then we bought a stock that we’d researched better, which was Southwest Airlines. That one has done really well.”

Another pitfall in many clubs is an unequal level of commitment from members. One frustrated member of a club, who wishes to remain anonymous, says. “In my club, everyone was gung-ho at the beginning. But then people discovered that it’s a lot of work.” She says that because she had managed her husband’s 401 (k) before she joined the club, she hacHHIIIIenion^nowiedge than the other members. And because she doesn’t work outside the home, she says members assumed she had time to do all the research.

“Anew member said. Til come, and I’ll put in my money, but I don’t want anything to do with the stock study. ’ It doesn’t work that way! It’s not just that I’m doing all the work; I’m not learning by somebody else helping me through it. That’s the whole purpose of a club.” The club’s investments were up only 8 percent in the first half of last year. “With the stock market the way it’s been,” she says, “we should have done a lot better.”

Linda Hinsley, a member of the Eden Financial Group, which is less than two years old, says her club has profited about 15 percent in just a few months because of scrupulous research. If a member has a stock that she wants to be tracked, she has to present a Stock Checklist to the Stock Tracking Committee. Then the committee fills out the Stock Selection Guide and then a Stock Comparison Guide. “We discuss the results, and then we vote,” Hinsley says.

“We’re really proud of the in-depth research we’re doing,”says Carla Rea, president of the East Dallas Women’s Investment Networking Association, or EDW1NA. “Although our club is a little more than a year old, many of us are still learning what the dad-gum terms mean! It took us a good six months just to get our bylaws and account set up. We bought our first stock, Chubb, in February, and the next one was Pfizer, the pharmaceutical company, which we bought right before it split.” According to Karen Smith, the club treasurer, returns from February to August of last year were 11.66 percent.

The size of a club may affect its chances of success. Although to an outsider it may seem like the more the merrier-and the more money to invest-this is not always the case. In fact, many clubs say the best combination is a small group of like-minded women who are at the same stage of life. “We currently have seven members,” says Susan Johnson, secretary of the 17-year-old Dallas Investors Group. “We’ve kept it small on purpose. At one point we got up to 23, and it was unwieldy.”

“We do well with 25 members,” says Mary Susan Barnhill, founder of the 11-year-old Dallas Syndicate. “Our members range from 40 to about 55. Our kids are educated, our houses are paid for, and everybody has similar goals.”

Because its members are well-established and financially secure, the Dallas Syndicate likes to take a few risks. “We each put in a minimum of $ 100 a month,” says Barnhill, who is also president of the Dallas Council of NAIC. “NAIC has a fabulous accounting program for stock clubs that makes it easy to keep track of it. We reinvest all of it. We haven’t taken a distribution in 10 years. Nobody wants it. We just keep buying and buying and buying.”

The Dallas Syndicate concentrates on long-term investing: “We have 75 percent of our portfolio in what you would call blue chip stocks,” Barnhill says. “Companies like Motorola, Intel, Microsoft, they just click right along. And then we have 25 percent of the portfolio in what we call speculative investing. Members will come to a meeting and say, LI heard about a new drug, or a new biotech company, or a new oil and gas find.’ We can’t do a Stock Selection Guide on these particular stocks because they might be only a year or two old, and they’re often tiny little companies.

“Lucent Technology, which we got as a spin-off from AT&T, has been dynamite. Another little company called Southwest Bank Texas has been a real good buy for us. We bought that just right after the IPO. It’s got a lot of potential. The only way to keep members1 interest is in buying and selling at all times, We own a total of 33 stocks, and our portfolio’s pushing half a million dollars. And our return was around 45 percent last year.”

Johnson says the Dallas Investors Group also likes to invest this way. “We’re about 75 percent long-term,” she says, “and then we speculate with small-cap stocks.”

Warning to novice investors, however: Don’t try this kind of risk-taking when you’re starting out. “I think for a group that’s just beginning, the NAIC methods are a very good thing to do,” Johnson says. ’’But for a group that’s been in it as long as we have, we’re a little ’seat of the pants. “We really don’t chart a lot. We like the rankings that Investors’ Daily does. We spend a lot of time talking about that. We try different investment philosophies to keep it interesting. And as of last July, we were up 24 percent over the past 12 months.”

Some clubs are strictly business. But for others, especially ones in which the members don’t work outside the home, there is a very important social aspect as well. The Penny Ante Investment Club meets in members’ homes and always begins with a lunch buffet provided by the co-hostess. A speaker, who is also invited for lunch, is scheduled for every meeting. After the speaker, the club conducts its regular business meeting. Unlike most NAIC clubs, the Penny Ante Group takes regular distributions of profits.

“Whenever our individual worth reaches a certain point,” says club treasurer Caria Morse, “we do a $ 1,000 distribution per member. We want to keep it at a certain level so that if one member drops out, a new member can afford to buy in. We’ve had 12 or 13 distributions since I’ve been in the club (about 20 years), and we’re very close to another one.”

Hinsley says the Eden Financial Group meets at a bank in Rockwall. “They give us the key,” she says, “and they leave the ValueLine out for us. After the meeting, many of us go to a restaurant and eat. We have a social committee, and we’re planning events where we’ll get our spouses or significant others to join us in the early summer for a barbecue or picnic so we can get to know each other better.”

For most club members the social aspects are nice, but the lifetime benefit is knowledge. Joyce Weber, treasurer of the Long Shot Investors Club, is the only founding member still in the club. “My husband and I have been investing since 1954,” she says.

“Even after all that time, I just attended a NAIC convention where I learned lots. It was very valuable. Learning never stops.”

In the early days, the club members didn’t always know what they were investing in, Dell Ellis says. In 1956, they bought a company called Syntex, that just kept going up like crazy.

“We didn’t know what it was,” Ellis recalls, “but we found out later it had produced ’the Pill.’ We didn’t even know what the Pill was!” Today Ellis believes in careful research and in investing in companies she knows something about.

Rea says that one of the best things about EDWINA so far is, “My husband is vice president of a brokerage firm. I just feel wonderful that I can have a conversation with him about stocks now and not feel totally ignorant.”

Confidence and success don’t always mean large returns. “What I have gained is that this makes me do something I’ve always meant to do,” Schreyach, of the WIGs, explains. “Because I’m committed to doing it, it keeps it in the forefront. I don’t procrastinate anymore. I’m investing on my own, too-usually in whatever the club is researching. This month. I think we broke even. We each made 3 cents, and we were so excited! We may have the lowest return of any of the clubs you’ve talked to, but we’re going to be great.”

GETTING STARTED

If you have assembled a group of like-minded women ready to form an Investment club, the first thing you should consider is joining the National Association of Investors Corporation (NAIC) to take advantage of their proven materials and techniques, NAIC membership is $35 per club, plus $14 per member. Individual membership costs $39. You can contact the NAIC at P.O. Box 220, Royal Oak, Ml 48068 or 248-583-6242. Check out the NAIC web site at http://www.better-investing.org.

Two books can help a new club get started: Starting and Running a Profitable Investment Club by Thomas O’Hara and Kenneth S. Janke Sr. This is the official guide from the NAIC. Another helpful book (and a more entertaining read} is The Beardstown Ladies’ Common-Sense Investment Guide (Hyperion, 1994).-J.B.

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