Is it really time for this Florida retirement community investment club to cash in their portfolio, as a newspaper financial columnist advises? The club’s problem, says writer Malcolm Berko in the Lake County (Ill.) News Sun, is that they “haven’t followed the wise, time-tested guidelines established by BetterInvesting, which have worked for thousands of clubs and individual investors.”
The Club’s View
This is the story. Nine guys in The Villages began an investment club in 2003, starting with $5,000 each and adding $5,000 apiece each January thereafter. Their capital investment is $450,000 and their total worth is $466,800.24. Here’s what the investment club says:
“At one point, we were told convertibles were the way to go. When those didn’t work, we bought drug stocks. Drug stocks fell, so we bought real estate investment trusts at the wrong time, and then we invested in utilities that did nothing. Then we went into tech issues, but they crashed, so we purchased bank stocks that went south. We tried the investment strategy ‘Dogs of the Dow,’ but it didn’t pan out. A couple of years ago, we got into gold, and we’re back to even with that. A year ago, we got into silver, but we’re down 11 percent. We tried options and European stocks but lost on both….” And so it went, with a bit of investment guru chasing.
The Columnist’s Advice
Berko’s suggestion: Break up the club and distribute the assets or be content with petty change in profits. Ten years earlier, he says, he’d have told the retirees among other things to:
- Never try to buy at the bottom or sell at the top.
- Only buy stocks with long-term rising dividend trends.
- Reinvest all dividends.
- Long-term rising net profit margins are an excellent precursor to capital gains.
- Always sell losers, because they increase your gains.
- If you don’t understand the company’s product, don’t buy the stock.
- Buy issues whose revenues are least impervious to inflation and the economic cycle.
- Past performance is the best messenger of future performance.
- Remember that it takes five years for a stock you buy today to be an overnight success.
BetterInvesting Weighs In
This is the view from BetterInvesting: That Florida club has a lot of money, and clubs in it for the long term should stay in the market no matter how stocks are doing. Hang in there, guys. True, bargain stocks are harder to find these days. But careful study using the BetterInvesting methodology and tools will start the club on a better path.
And while most investment clubs are interested in stocks rather than mutual funds, they might consider taking our free four-part webinar series, “All About Mutual Funds,” beginning April 18. Hey, we said free and don’t the experts say that education is an intangible asset?
BetterInvesting is a national nonprofit organization that has been empowering individual investors since 1951. Founded in Detroit, the association (formerly known as National Association of Investors Corporation) was born out of the conviction that anyone can become a successful long-term investor by following commonsense investing practices. BetterInvesting has helped more than 5 million people become better, more informed investors by providing webinars, in-person events, easy-to-use online tools for analyzing stocks and mutual funds, a monthly magazine and a community of volunteers and like-minded investors. For more information about BetterInvesting, visit its website at http://www.betterinvesting.org/investing/landing/openhouse/blog/index.html or call toll free (877) 275-6242.