This article highlights the importance of investment groups for women who are interested in taking control of their finances.
Who manages the long-term finances in your family? If you are like the vast majority of women in traditonal relationships, chances are, you'll say "my husband." If you are in a non-traditional relationship, you may shrug your shoulders and say, "neither of us." Women have arrived in the workforce, and each day, more and more are coming into their own money. Employer retirement programs, sums of money from inheritances, salaries from jobs in the work-a-day world all have one thing in common - they can grow at astonishing rates if they are managed well. Yet most women haven't a clue about the world of finace beyond the shallow waters of basic banking. We see the numbers from Wall Street on television and in the often skipped business section of the newspaper but may not know what they mean. We might get a quarterly summary of our contributions to a company 401K plan, but give it no more than a quick glance. We may attend a seminar on financial planning only to get turned off by the dry and sometimes incomprehensible language. How do we learn? Who can we turn to?
The answer ? We can learn as group, and turn to ourselves and some basic resources to learn about the ins and outs of long-term fiancial planning. All over the country, groups have formed to explore the world of stock, bonds, and mutual funds - having fun while they're at it. These groups are commonly referred to as investment clubs, and they make sense for a growing number of women who want to take their money into their own hands instead of leaving it in the hands of others to be "taken care of." In fact, according to the National Association of Investors Corporation (NAIC), the last 10 years has seen over a 25% increase in the number of registered women's investment clubs, from 37.5% in 1988 to 50.2% in 1998.
The concept of investment groups or clubs is simple. Members generally meet once a month to discuss the pros and cons of investing in particular companies, or selling some of their shares. There is generally an educational component to the meetings as well - one time the company might learn about the advantages and disadvantages of stocks versus bonds, the next time they might learn how to read a company's annual report. Finally the members contribute a previously determined amount of money which is placed in a brokerage account and is used to purchased agreed upon stock.
This community approach is what makes investment groups popular. Learning about money can be daunting because the topic is so loaded, and the language so technical. Learning with other people eases some of the pressure and confusion. Taking risks becomes easier - and the occasional negative results less disastrous - when it is done in a group. Sarah Young Fisher and Susan Shelly note in their book, The Complete Idiot's Guide to Starting and Investment Club , that "while each member in the group is responsible for researching...investments, the members must fully, or mostly agree before an investment is made. If there's a goof, the blame normally...is shared by the group." (p. 9) In addition, participation in an investment club is relatively inexpensive. Most clubs require contributions in the twenty to fifty dollar range each month. Now think for a moment - eliminate one or two meals out, or hold off on buying just one "Sale" blouse or pair of trousers, and you have your contribution for the month!
For women, taking control of their finances becomes critical when you examine the disparity between men's and women's earnings. This is especially true when you consider how future retirement income will be affected. For example, it is well known that women spend a much longer period of time out of the workforce than men do. But do you know the acutal numbers? According to Ellen McGirt, a finance writer and creator of Cassandra's Revenge investment website for women, "the average woman will spend 14.7 years away from the workforce [while]...her male counterpart will spend only 1.6 years away." ("Notes on Wealth, Investing, and the Ulitmate Revenge," ) This has a crippling effect on retirement earning.
Again, McGirt says that "today's woman of 62 has logged nearly 50% fewer hours of paid work and has earned a 33% lower salary of me of the same age. This entitles them to only 25% of the retirement benefits that her male counterparts receive." ("Notes on Wealth, Investing, and the Ultimate Revenge.") In fact, according to the most recent Census, 75% of elderly people living below the poverty line are women.
The above facts aren't meant to scare you, but they do serve as a good eye-opener. Investment groups can help turn the statistical tide on the scary percentages shown above. Women's investment clubs can be successful ventures. In fact, they often outperform investment clubs comprised of all men. The members of the NAIC back this up. According to their information, during 1999, the compounded annual lifetime earnings rate for their female clubs was 32.1% compared to 23.2% for men. The reasons for this are still under speculation, but women's clubs tend to be more willing to subscribe to a "˜buy and hold' philosophy of investing, to ride out market rough spots, and to thoroughly research prospective companies instead of relying on "˜hot tips.'
If you think an investment club might be right for you, there are a few things you can do to help the process along. First, take an honest look at where you stand financially, taking into account your existing debt, your earnings, and your other expenses. Next, move from a nebulous idea of where you want to go financially, to having clear cut goals which are eavaluated regularly, perhaps on a quarterly basis. Finally, decide whether it would be best to join an existing club, or to start your own. Investment clubs offer a unique learning opportunity for women, an men, to take an active role in their financial life. You have little to lose, and everything to gain. Go for it!
References
1. Fisher, Sarah Young and Susan Shelly. The Complete Idiot's Guide to Starting an Investment Club. MacMillan: Indianapolis. 2000.
2. Goodman, Susannah Blake. Girls Just Want to Have
Funds. Hyperion: New York. 2000.
3. Maranjian, Selena. Investment Clubs: How to
Start and Run One the Motley Fool Way. The Motley Fool, Inc.: Virginia. 1998.
4. McGirt, Ellen. "Notes on Wealth, Investing, and the Ultimate Revenge."
5. National Association of Investors Corporation.
"Women's Investment Groups: On the Rise, Producing Winning Profits."
