Shedding a Tear Over Vanishing Investment Clubs
The trend may be over, but the former host of public radio's 'Marketplace Money' says creating a different type of group can help your money grow
Nobody likes to talk about money, right? We don’t want other people to know how much we have or what we do with it or how bad our financial decision-making might be.
That’s because we all live completely different money lives, especially when it comes to investing.
The Idea Behind Investment Clubs
But investment clubs have long been an antidote to the queasy feeling many of us get when the talk turns to stocks and bonds and, heck, even laddered CDs (“You want me to remember to add a new rung every how many months for how long?!”).
The idea is that investment club members have a similar amount of money at stake and their group will create brilliance, or make mistakes, together. It’s a lot easier to learn and ask questions about money when you’re not worrying about being judged.
Club Membership Has Nosedived
I’m a fan of investment clubs, which is why I was saddened to read the recent Wall Street Journal story that was pretty much an obituary for the once popular alliances: “Fun Fades at Investing Clubs.”
The article said total membership fell to 39,000 in 2012, down from 400,000 in 1998, according to Better Investing, which provides support to clubs. Overall membership has declined every year since 1998.
“The problem, as any investors and investment-club members see it: Stocks aren’t fun anymore; they are scary,” reporter E.S. Browning wrote.
My Year Following Three Clubs
I fondly remember profiling investment clubs in Seattle, San Jose, and Fairfax, Va., in 2007, when I hosted public radio’s Marketplace Money.
The Virginia club, a baker’s dozen of women in their 50s and 60s, called itself Formerly Baroque. They delighted in learning about everything from the Baltic Dry Index (the daily number given to the price of moving raw materials by sea) to the stock of Crocs, which several of them also wore.
That year, Formerly Baroque racked up a 16.55 percent return on its investments. None of the women had any intention of leaving the club with that kind of performance!
A year later, during the heart of the financial crisis, they’d lost more than 40 percent and two club members had cashed out. “I think we all noticed that the dynamics did change, from going to the meetings and having a lot of fun and just laughing about ‘Well, do we buy this stock or that stock,’” club member June Chalou told me at the time. “We had to really stop and analyze whether or not we should even buy stocks at all.”
Ultimately, club members decided to stop investing and just keep an eye on the stocks they had. “Some of the members felt the club was no longer as much fun,” Chalou said.
No, it’s never much fun when you’re not making money.
The Best Part of Investment Club Meetings
The decline of investment clubs means we may be losing one of the few venues that fosters free and open discussion about investing and learning how the financial system works.
But who says you need to put a chunk of cash on the line to educate yourself about ways to make your money work for you?
Sure, you may have more incentive if you have skin in the game. But I found the most interesting and useful portion of the club meetings I attended to be the time members spent researching and explaining aspects of the stock market and the economy.
You can learn about limit orders on stocks without executing one. The key is to surround yourself with other people who, like you, want to get smarter about money.
That, in turn, will empower you to have a fuller conversation with your own financial adviser — or spur you to find one.
Or perhaps it’ll lead to a discussion with your spouse, partner or grown children who are part of your financial planning process.
Alternatives to Traditional Investment Clubs
Next Avenue’s Women and Money blogger, Kerry Hannon, wrote a post suggesting that women make money a regular conversation with their trusted girlfriends. She also recommended starting a money book club, where members can learn about an investing topic and chew it over. And she talked about creating a “money-circle discussion group,” an investment club, but without the investments.
Those are pretty good ideas for guys, too.
So why not join or create a club where the investment is simply your time, energy and willingness to ask the dumb questions? (In reality, there are no dumb questions when it comes to money.)
Knowledge truly is the most powerful tool you have in your arsenal. Sharing that knowledge not only makes managing your money more fun, it makes you more confident in your financial decision-making — especially when you realize that everyone else at the party (and really, it should be a party!) thinks they’re the worst money manager in the room.