Can you tell the difference between a P/E ratio and a PEG ratio -- and do you know why they matter? Do you know how much revenue and earnings growth a company should have before you invest in it? Whether you meet regularly with a financial adviser or invest alone, it's smart to learn more about investing and to research stocks you own -- or want to own. Investment clubs provide a consistent venue for doing just that.
Here's how it works: Typically, investment club members pay an initiation fee and regular dues. They meet monthly to review their existing portfolio and to discuss stocks they may want to buy or sell. Meetings often feature an educational speaker, since the primary goal of many clubs is to educate their members. When a club has enough money in the pot and a promising stock at an acceptable price, it votes on whether to buy it.
Natalie Johnson, treasurer of the Godiva Investment Group in Mountain View, Calif., says her monthly club meeting provides needed structure. "I wanted to learn how to pick stocks and track them, but I didn't have the discipline to learn on my own. When I'm on our stock selection committee, I put more time into my homework, and I learn a lot."
"With the club, you get the advantage of the group think," explains Johnson. "How's the company doing? Is the stock at a good price?"
Like many clubs, the Godiva Investment Group relies on the investing methodology and guidance of the National Association of Investors Corporation. The NAIC provides books, forms and software, as well as suggestions for running an effective club -- how many officers to have, how to vote on investment decisions and so on.
Even seasoned investors stay in clubs -- sometimes for decades. Not only do they share the drudgery of researching companies, but they also get to socialize. (A little wine and cheese will make any annual report more palatable to read!)
