Safety in Numbers

You’ve heard of Oprah’s book club. In fact, you’ve probably read one or more of the books and maybe even formed your own club with a group of friends. You read a book, get together every couple of weeks, talk about the book for eight minutes, and then gossip for an hour and a half.  It’s more about the chitchat than the novel. While the  book club definitely has its place, many women are opting instead to allocate their free hours to a fun, social way to learn the stock market and make a little money in the process by creating  a stock club.

Times have certainly changed over the last fifty years. It’s no secret that women, for the most part, still take a back seat to men when it comes to knowledge of investments and the stock market. Women should know just as much, if not more, when comes to investing since women live longer than men, spend more time away from the job due to family commitments, and usually handle the household finances. Every woman should have a baseline understanding of stocks, bonds, and mutual funds. But most women resist or make excuses – “I’m too busy,” “I have way too many other commitments,” “I wouldn’t even know where to begin.”  A stock club is the perfect introduction to the world of investments. While you may have a 401(k) or stock options at work, a club gives you the knowledge and the opportunity to make investment choices and put your own money into play with minimal risk and maximum assistance.

Stock clubs can have as few as 4 or 5 or as many as 100 members. There is usually one monthly meeting for 1-2 hours and dues of $50-100 per month in addition to an initial investment. There is a president who runs the meeting, a treasurer who collects the dues, an outside advisor (usually a stock broker) who gives advice and executes trades, and members who vote on and make presentations about investment opportunities. A typical stock club meeting agenda is as follows:

	Pay dues.
	Discuss current investments: See how the club’s investments have fared over the past month and discuss general market conditions.
	Look over the president’s report: The president usually prepares a report each month detailing the investment activity and reviews gains and losses.
	Presentations: Club members take turns making presentations about different stocks. A vote of two thirds is required for action. The club can add to a current investment, buy a new stock, sell a current investment, or do nothing.
	Meeting adjourned.

Roslyn Guben is a Financial Advisor and Wealth Management Specialist for Legg Mason Wood Walker, a global financial services firm based in Baltimore, MD. She has been an advisor to stock groups for women and couples for over two decades and has given countless women their first taste of investing. “The stock clubs that I work with provide an introduction to many women with little to no experience investing in the stock market. It’s not a class or a be-all-end-all, but women learn how to research online, learn what to look for in the business section of the NY Times, and expand their base of knowledge about equities. “It requires zero prior knowledge and can be a great opportunity to meet people and network.

Once new members gain an understanding of the basics and see that they can make some money in the club, their thirst for investing usually increased dramatically. “For many women,” says Roslyn, “a stock club is a gateway to further individual investing efforts.” While the group decision-making and established practices of the club are essential in the beginning, many women use the knowledge they gain to wander into investment avenues that the group would not consider. Marlene, a member of one of Roslyn’s stock clubs in Baltimore took the knowledge that she gained in her stock club and used it to build a successful portfolio for her family. “While my husband mostly relied on word-of-mouth tips and random assessments, I built us a solid diversified portfolio that has done really well.”

According to Roslyn, women tend to be more conservative, thorough, and open to advice when investing than men – and it pays off. Most of her stock clubs have managed to reap the rewards of the bull market and stave off some of the negative effects of the recent bear market. While investment success is not guaranteed, it’s impossible to know how successful you will be unless you try. If you want to join a group, start by asking co-workers and friends. You might be surprised at how many people belong to a stock club. If you want to create a group, it makes sense to invite people with a similar profile. When club members are similar in age, risk aversion, and ideology, decisions are easier to make and so is money.