The Carlisle Mosquito Online

Friday, February 8, 2008


Investment clubs meet for fun and finance

The New York Stock Exchange, built in 1903.

Two decades ago, a group of women were sitting around the pool at the Chelmsford Swim and Tennis Club drinking coffee and waiting for their children in a swim meet. Between sips and cheers for their children's performances in the water, the conversation turned to the idea that a group of intelligent women like themselves should be able to find an interesting activity that would turn a profit.

So, in the summer of 1987, the Carlisle Exchange investment club was born. Founding member Debbie Jancek reports that 11 women were the original members; they hired a lawyer, drew up bylaws, and set up their partnership. Investment clubs are legal entities; for tax purposes, they are considered small businesses. Each member initially contributed $35 per month to the club, which met regularly in Carlisle.

That year, the American market experienced what is now euphemistically called "market volatility," and it tanked in October. The club did not make its first investment until January of 1988, but took the intervening time to set up operation, get some advice from professionals like Sue Heald's husband Ed, who was then a broker and advisor with A.G. Edwards, and generally start learning the business of individual investing.

Researching financial opportunities

As months stretched into years, the Carlisle Exchange invited speakers to their group to advise them on a variety of investments and approaches, and learned about rolling averages, individual stocks, mutual fund strategies, prospects in long-term care investment, and a full spectrum of financial opportunities. They researched individually and as a group, joined the American Association of Individual Investors (AAII), attended lectures and meetings, visited investment houses and connected with other clubs to learn and keep current.

In 2001, Jancek offered a workshop on "How to Start an Investment Club" through Concord-Carlisle Adult and Community Education. In 2002, the group appeared on the financial television show, "Power Lunch" on CNBC to predict the Super Bowl game score (in competition with two other clubs) and provide some of their favorite stock picks (see Mosquito, February 8, 2002, page 1). The Carlisle Exchange, now with nine members, is still going strong and still learning. Most recently, they studied option trading with a Concord men's investment club, and began looking into exchange-traded funds (ETFs).

Committing to success

Their longevity is unusual. According to Herb Barnett, chair of the National Association of Investors Corporation (NAIC) Computer Group, most investment clubs disband after their first year or so. Jancek emphasized that although members do not have to be friends, they must get along, be able to compromise over risk, share a general philosophy and trust each other.

She also recommended that members invest only what they can afford, look upon returns as extra money, and not view the club as a source of necessary income. Over the years, the members of the Carlisle Exchange have become friends, traveled together on vacations, and become successful enough to be able to cash out members who have had to leave the club and still make a profit. They realized an impressive 16.9% return in 2006.

What other dividends are there?

Clubs that do not stay together as long as the Carlisle Exchange still enjoy their successes and disband for a variety of reasons. Despite their decisions to discontinue operations as a group, a club can provide its members with a great deal of information that they can use as individuals.

Around 1992, another club of ten female friends and neighbors formed in Carlisle, mainly to educate themselves about markets and investing even while they were venturing into the market. The group agreed to adopt a sort of learn-it-on-the-job approach. Buying was more challenging at this time, as the market was booming and stocks were overpriced, but the group persevered, joined the NAIC, and set about navigating the investment world.

The club worked together successfully for five years, and then, as members' children grew up and some moved out of town, their numbers began to shrink. New members were hard to find at this time, so the group had to discuss its future. As it turned out, the members felt that they had learned enough to invest and manage their individual portfolios, so they came to an amicable agreement to disband. Members went away feeling satisfied that the club had provided them with the base of knowledge they needed to continue independently.

A variety of issues can determine the success or failure of an investment club. Timing can affect the success of investments, as well as the group's ability to remain a unit. Obviously, if the members do not commit individually to a group investment philosophy, the club cannot succeed. If they do make this commitment and they treat the partnership as the legal entity it is, they can achieve a variety of investment and educational goals, and, according to members of both Carlisle groups, they can have a good deal of fun together.

Mars, Venus, or a convergence of planets?

Although there are many clubs nationwide that are made up of men and women, there is a predisposition for the genders to separate and form their own organizations for amateur group investing. Certainly the two clubs in Carlisle reflect that tendency. Studies of team composition through the years suggest that the success rate for single-sex clubs and mixed-gender clubs is converging. The best idea is to be in an organization with people you feel most comfortable with, regardless of gender.

Getting started: now or later?

Starting an investment club is not difficult, but it does require organization and commitment. This is a good year to get one going, according to club veteran Jancek. Her club's attitude toward the present market volatility and economic doldrums is that a bear market can yield buying opportunities if you do your homework and make good predictions. Working from the Carlisle Exchange model, a period like this can also be a good time to get the club organized before making an initial investment.

If you are interested in starting an investment club, there is a wealth of information available. Start a conversation with people who share your interests, and see if you can organize a group of six to 12 people. Once the group agrees to meet, the best way to establish a solid club is to do a little research and then get some legal advice on setting up your partnership. As you learn the ropes, rely on professional advice, attend lectures and seminars on investing, and meet regularly as a group to keep consistency, continuity and momentum going, just as you would in any business partnership.

The Gleason Public Library stocks a number of titles with information for beginners, such as Douglas Gerlach and Angela McQuade's Investment Clubs for Dummies, Sarah Young Fisher and Susan Shelly's The Complete Idiot's Guide to Starting an Investment Club, and Getting Started in Investment Clubs, by Marsha Bertrand. The Internet provides an enormous amount of information. Try Google for starters, and investigate some of the following web sites:

For government information and start-up regulations, try the Securities Exchange Commission's (SEC) informational site:

For background, set-up and information, Motley Fool offers the excellent site:

Yahoo has a number of helpful sites, including:

The AAII site is:

The NAIC site is:

Sites for general information are: and

2008 The Carlisle Mosquito