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February 08, 2008 12:27 pm
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Photos
Record-Eagle/Jan-Michael Stump
Record-Eagle/Jan-Michael Stump
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Editor's notes: invest1.jpg
invest2.jpg
Learning Bear from Bull
Its unpredictable nature is just one reason many would-be investors shy away from the stock market. But investment clubs in Traverse City, Michigan, are a popular way for individuals with limited resources to become active investors.
By Marta Hepler Drahos
CNHI News Service
TRAVERSE CITY, Mich. — Herb Lemcool’s investment club
can guarantee when a stock is
going to go up or down.
“All we have to do is sell it,” jokes
Lemcool, treasurer of the 18-year-old
Cherry Capital Investment Club.
Its unpredictable nature is just one
reason why many would-be investors
shy away from the stock market. But
there are many others, from not
having enough money to invest
to not understanding market
fundamentals.
That’s where investment clubs
like Lemcool’s come in. A popular
way for people with limited
knowledge or resources to
become active investors, the clubs are
small groups of individuals who meet
regularly to learn about the market,
review studies of stocks presented by
club members, and select one or more
stocks to buy with pooled dollars.
While the average club has 11 members
and invests $84 a month through
its program, according to the nonprofit
investment education organization
BetterInvesting, club makeup and
rules vary widely. Some clubs have a
hard and fast rule that says everybody
invests the same amount; others have
a minimum-maximum range. Some require
that dividends are reinvested or
that members who leave the club are
paid off with cash instead of stock.
Financial advisor Briant Sikorski
has helped form six clubs and assists
them with everything from drafting a
partnership agreement and setting up
an account to looking into investment
methods and strategies. Most clubs are
organized as a general partnership for
the purpose of investing their assets in
stocks, bonds and other securities for
the benefit of the partners.
Sikorski said bylaws are important
in spelling out things like how decisions
are made and what to do if somebody
doesn’t do their homework
or make a meeting. So is
making sure that members are
compatible, if not necessarily
at the same level of experience.
“I think you all need to agree
within the club what your
objectives are going to be,” he
said. “You don’t want a couple of wizards
who say, ‘Let’s buy options,’ and
then five neophytes who don’t even
know what an option is. So you want
to have a club at least willing to work
together and work with each other.”
The Millionairess Investments club
grew out a group of women chatting
and “trying to get through some of
the junk that we all avoided talking
about,” said member Colleen Shannon.
“I think all of us in the group
realize that as women we’re not very
finance oriented. We don’t talk about
it with other women. We needed to address
it.”.
After studying on their own and
hearing the investment battle cry over
and over, they invited Sikorski to
work with them and drew up plans
for a partnership. Each
member put in a balloon
payment to get the club
started and now invests $25
a month.
“We tried to pick a number
that everyone could
make the sacrifices to
do,” Shannon said. “As
one mom said, ‘That’s one
Happy Meal.’”
While it hasn’t made its
first purchase yet, Shannon
said the club has decided
to invest in “green” or renewable
energy and other
environmental stocks. With
luck, its performance could
live up to its name in time.
Members of the Cherry
Capital Investment Club
pay $50 to join plus a $50
annual fee that helps pay
for investing accounting
software and dues in
BetterInvesting, which
provides member support.
Then they chip in $50 a
month each to invest in
companies like Harley Davidson,
Johnson Controls
and Starbucks.
“So far we’ve invested
$36,000 and our portfolio
is now valued at $60,000,”
said Lemcool, one of five
current members of the
club from a high of 14.
“This last month has been
a disaster, but overall
we’ve had a pretty good appreciation.”
It’s just one of several investment
clubs the retired
business owner is involved
in, including KoolKids, a
family club he and wife
Barb started several years
ago for their 25 children
and grandchildren in place
of birthday and Christmas
presents.
“We report to them yearly
at the family Christmas dinner,”
Lemcool said, adding
that the family joke is that
dinner out should be at
Wendy’s, in which they’re
shareholders. “We work the
philosophy of buy and hold,
investing in companies that
are going to give you good
dividends. Since 1998 we
put in almost $6,000 and
the value is almost $12,000.
So the kids can see how it
grows without doing anything.”
The clubs are among dozens
in the area with inventive
names like Lake Effect
Growth and Talk Stock.
Some meet at offices during
the lunch hour, others
get together in the evening
at public spaces like the local
library or restaurants.
While the clubs are a
good way to learn about investing
and perhaps make
some money in the bargain,
they’re also an opportunity
for members to network
personally and professionally.
For Point of Value Investment
Club in Elk Rapids,
meetings are as social
as they are educational.
Besides holding summer
potlucks, the group of
retired women traveled to
New York in October on a
package theater tour.
“It was like a big sleepover,
with some business
talk,” said club secretary
and treasurer Barbara
Schantz, adding that members
got a guided tour of
Manhattan and the financial
district and posed for
photos with the famous
bull sculpture near the
New York Stock Exchange.
If it isn’t the oldest investment
club in Elk Rapids,
the group may be one of the
most active. Currently it
has 11 holdings, including
volatile club favorite Intuitive
Surgical. In fact, while
the prevailing wisdom in
investing is to buy and
hold, Schantz said the club
often takes the opposite
approach, especially in the
current market.
“We’re not afraid to sell
and we’re not afraid to
buy,” she said, noting that
the group learns as much
from its failures as from
its successes. “The list of
stocks we’ve bought over
the years would blow your
mind. Even with the stock
market as goofy as it is now,
the gals are still enthusiastic
about buying new
stock, which is amazing to
me. Their interest has not
waned.”
While uncertain economic
times might be seen
to discourage investment
clubs, attendance at meetings
of the Traverse City
model investment club Talk
Stock has increased recently,
said Ginger Carrick,
education and computer
group chair for the Northern
Michigan Chapter of
BetterInvesting.
The “for education only”
chapter club analyzes companies
and stocks, demos
investment software and
provides information on
how to start an investment
club.
“Surprisingly enough, I
think people tend to take
more interest when there’s
a lot of fluctuation in the
market. It goes in streaks,”
Carrick said.
While in general they
perform according to their
personality, as many as 60
percent of investment clubs
outperform the market, according
to some estimates.
If that’s true, Sikorski
said, “I think by and large
the reason for that is those
people are constantly
learning and they have a
tendency to buy and hold
onto things. They know
there are normal market
cycles.”
Like most people, Gary
Gardner joined an investment
club with an eye
toward applying what he
learns to his retirement accounts.
Now he’s a member
of the two-year-old investment
group Lake Effect
Growth, where his favorite
meeting segment is the 5- to
10-minute education portion
on topics like “What’s
the thing called technical
analysis?” and “What happens
to a buy order?”
As a result, he said he
has become more active
with his personal portfolio
— especially now that his
children are closing in on
college age.
“I’ve learned a lot more,”
he said. “I can look at a
stock sheet and have some
knowledge of what that
means and what I want to
invest in personally. I know
what a PUI is. I know from
looking at a company’s
dividends whether that’s a
little or a lot.”
Marta Hepler Drahos writes for the Traverse City (Mich.) Record Eagle.
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