There was a time when investment clubs were all the rage. Financially minded people — amateurs and pros — would gather over wine and snacks, book-club style, to research stocks and discuss which companies looked like the best investments.
But in recent years, with the market resembling a roller coaster and websites like Yahoo Finance and Morningstar making it easier to individually research and invest in a company, many clubs have disbanded.
The recession was the death knell for one such club, co-founded by Ann Gibbons, of Chicago, in 1996 along with a fellow certified public accountant she met while working at a Chicago accounting firm, then-Arthur Young (now Ernst & Young). She served as the Upside Downside Investment Club’s treasurer and monthly hostess until 2008, when the 10-person group decided to separate over economic strains.
Many of the original members who stayed in the group the entire time broke even, Gibbons said, whereas those who left right before the market went south lost money.
“Up until that time, we had been growing, growing, growing,” Gibbons, 68, said. “But in 2008, the stocks were really falling, and some people had their own businesses, and they weren’t feeling very flush. People needed the money. It was a tough time, so it kind of took the fun out of (the club).”
Gibbons said the members, which included attorneys, architects and health care professionals, would meet once a month at her house, eat pizza, drink a glass of wine and present their latest research on companies such as Apple, Starbucks, T.J. Maxx and Netflix. Each member would contribute $100 per month, and each investment decision would be collaborative.
“I think we had a really good portfolio, and such a diverse group,” Gibbons said. “All very bright people. I think we all enjoyed it, and we’re sorry that the economy took the turn it took.”
Gibbons said some members of the group reconnected via a poetry club, which she recently quit.
“I’m much more a financial person than a poetry person,” she explained. “But we still see each other. We respected one another.”
Others, like Betty Sinnock, of Havana, Ill., have had better luck. Sinnock, 79, was a founding member and treasurer of the Beardstown Ladies, a group of 16 senior women — teachers, real estate agents, bankers, and “one farm wife who was very involved with National Pork Industry” — who found renown via their investment club in Beardstown, Ill.
The group, which started in 1980 as the Beardstown Business and Professional Women’s Investment Club and was reorganized and renamed in 1983, became famously known as the “grandmothers of the investment world.” Its purpose was to educate women about investing.
“In the ’60s or ’70s, (society) didn’t think ladies should be involved in the (stock) market,” Sinnock said. “This was a gentleman’s market.”
Throughout the years, the group published five informational books on investing, the first of which sold more than 800,000 copies. Despite an error in one of the books regarding the annual rate of return for the club, which tarnished their reputation and which Sinnock said she continues to regret, the club is going strong.
“We’re continuing to meet every month,” Sinnock said. “To my knowledge, there’s been absolutely no talk of disbanding or losing our members. We’ve lost a lot of our charter members through death, but we have continued to bring other partners in to fill those chairs.”
Sinnock left her job as a bank trust officer in Beardstown in 1987, and moved to Havana for a similar job. In 1996 she started the Riverview Investment Club of Havana.
“It’s a newer club, and we’re still trying to follow the basic rules: study and understand your investments, and what they’re doing,” Sinnock said. “We don’t fly by night. We study (a company) and see what we know about it before we’d put money into it.”
Sinnock and Gibbons said research was or continues to be an integral part of their clubs. They gather information using Value Line, newspapers, (the magazine) Better Investing and websites like Yahoo Finance. Sinnock, who is active in Better Investing’s regional chapter, the Heart of Illinois Regional Chain, said that her two investment clubs have remained intact, but she has seen others not fare so well.
“We’ve seen a substantial decrease in memberships,” Sinnock said. “I think one of the reasons is the Internet, and people feeling like they can get the information on their own, at home, sitting in front of their computers. Many of the people who have left the clubs feel like it’s just not necessary.”
Hemil Shah would agree. Shah, a 29-year-old graduate student at the University of Chicago Booth School of Business, started the Twenty20 Investment Club in 2009 with six friends — engineers, CPAs and sales and marketing professionals — to learn the ropes of investing. But the group just disbanded.
“It wasn’t working out, and people started reprioritizing, and we’re not getting much out of it anyway,” Shah said, adding that the club decided to separate by the end of 2011 for tax purposes.
In 2009, each member initially invested $5,000. The next year, club members gave monthly contributions of $50. In 2011, each member could invest $2,000 or introduce a new member to the group and forgo paying the money, which was Shah’s way of expanding the club.
“My goal was to increase the fund’s size,” Shah said. “There’s a huge benefit to it.”
But members chose to pay the $2,000, which Shah said was never a financial burden.
“Money was never an issue because the group of people we have are working professionals in couples, so they have double incomes, so it was not that big of an investment for them,” he said.
The demands of dealing with the market’s volatility eventually led to the club’s demise, Shah said. Though their six- to eight-company portfolio, which included successful stocks like Apple and Procter & Gamble, was outperforming the market by 2 or 3 percent, club members thought their time commitment outweighed their investment gains.
“Everybody has a family and full-time jobs,” Shah said, so investment-club time was mostly limited to nights and weekends. “It was very difficult to keep everybody focused. Some were very passionate about it, but they weren’t able to make decisions on time because you have to make decisions collectively through a majority decision. We were not able to move at the same pace as the market.”
Throughout the life of the club, four of the seven members moved to different cities or countries. Members would communicate via conference calls, email and such online collaboration tools as Google Docs.
Shah said more investment tools continue to launch and make it easy and inexpensive for virtual clubs to keep track of their investments. His group used Bivio.com, a Web-based tool that links a user’s account to his or her brokerage account to automatically and securely transmit account information such as member deposits, stock purchases and sales, mergers, and dividends into a Bivio account.
Shah said he is disappointed the group disbanded, but he will continue to invest individually because he has a good handle on the financial markets,
“I’m very sad, but everything has a life, so it is what it is,” he said. “Nowadays, it is so damn easy to do this in your own portfolio.”
ksamuelson@tribune.com
