Club Money

There’s something about riding a bike on the week-end that helps a person better appreciate the intense training it takes to compete in the Tour de France. Tossing a football in the backyard helps you realize the quick thinking and strength Bret Favre needs as he laces one to a tight end.

Diane Munson and her cohorts in the Way North Investment Club understand this. Munson, of St. Francis, Minnesota, has been meeting with the nine members of the all-women club since 1998, about a year after the club was formed. With more than a decade of amateur experience, club members can say they have a modest appreciation of the research, analyzing, and synthesis it takes for the pros to manage a pool of investors’ money.

Club members have been devoted enough to their task to get their club named one of the top-three best-performing investment clubs in Minnesota in the 2006 Value Line awards competition. Way North’s compound return since the club’s inception in May, 1997: 11.77 percent. That’s no small feat.

The competition is sponsored by BetterInvesting, an online educational arm of the National Association of Investors Corporation, a Michigan-based nonprofit. It ranks clubs based on how long they’d been in existence, the consistency of their portfolio returns over time, and the diversity of their portfolios. Club portfolios are also evaluated against the performance of the Dow Jones Industrial Average and the Standard & Poor’s 500. There are 416 clubs in Minnesota that are registered with BetterInvesting, and 300 entered the Value Line contest.

“We have a really good time,” Munson says of Way North. “It’s a very diverse group from all over the metropolitan area. [The club] has helped [members] do a better job managing their 401(k)s or other family investments.”

An informed investor is a better investor, which is why I like investment clubs. (I used to belong to one, but had to leave for corporate compliance reasons.) Participating in a club can be fun—and you learn along the way.

What exactly constitutes an investment club? It’s a group of investors—anywhere from 2 to 20 people—who pool their money, analyze stocks, and then present their findings to members of the group. Members discuss a stock’s attributes and decide whether to buy it.

Most investment clubs meet once a month. By pooling their investment dollars, individuals can purchase stocks they could not afford otherwise. Likewise, the club can create a diversified portfolio by pooling the intellectual resources of the group. Risk is spread across all individuals in the club.