The differences in members' stakes can fan the flames, too. "That has kept us from having any more problems," she said. That's why Mary Beck's club in Fort Lauderdale requires prospective members to attend at least two NAIC seminars. Often, it is new members, untutored in a club's ways, who are at the center of investment disputes. When the 20-member club impetuously voted to buy 50 shares of that stock, "10 of us put in our resignation before the next meeting." Although the club initially followed the NAIC guidelines, "it got to the point where someone who had been down to one of the gambling boats in Mississippi came back and said that it was so crowded that we should invest," she said. That is what happened to Patricia Brown's club in Huntsville, Ala. But some members, more daring or impatient, want to act on their barber's latest tip or dump stocks if they haven't appreciated after a few months. Most clubs officially subscribe to the NAIC's guidelines of researching stocks thoroughly, buying stocks in companies that are at least 5 years old and holding the stock for five years or more, for example. Up to 40 percent of these clubs never make it past 18 months.ĭifferences in investment philosophy account for most club disputes, said Thomas O'Hara, chairman and founder of the NAIC, which is based in Madison Heights, Mich. There are ways to skirt or soften some problems, but the numbers suggest few people use them. Bickering, bullying, backstabbing and boredom can test the members and put them at financial risk. About 45 percent of clubs outperformed the S&P 500 in 1994, for instance, and in 1992 about 70 percent of clubs bettered that benchmark.īut, much like the garden club or fraternity, these groups have a dark side. Today, the NAIC has more than 14,000 member clubs, accounting for more than 230,000 people.Ī very important reason for this growth is clear: These clubs often beat the market. Last year, the number of clubs affiliated with the National Association of Investors Corp., the non-profit umbrella group to which many clubs belong, grew by 23 percent.
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