Investment Clubs and Group Economics.
401k= Investment Gateway Drug.
In my first endeavor to learn and understand more about basic finance and investing beyond saving and banking I would look over the details and information sent regarding my 401k. I tried to understand the funds, the forecasts, the purpose, costs and expectations. Soon I would come to open a separate brokerage account to make attempts at investing by buying some stocks on my own. I bought several popular and not so popular books on investing, trading, evaluating stocks and of course how to make money doing all of these things. Books ranging from “The Intelligent Investor”, (paperback thick enough to choke a horse) to “A Random Walk Down Wall Street” to books on charting and market timing, (good luck). There’s definitely a lot to the whole investing and buying stocks and bonds thing than meets the eye, or is it? Those books can make it seem like you better have a Master’s degree in “Financiophilosiphicologyconomics”, but fortunately you don’t. Like many other things, finance and investing would seem like some cloudy, murky science that only the initiated would know their way around. To get a good understanding you needed to be ushered in by someone that is already in the know fully, well not so much. It’s kind of like you don’t really need to know how a combustion engine works in order to own and drive a car. I would soon find out that beyond the super complicated things such as IRR – Internal Rate of Return, that most everyday working folk who save and invest will never be involved in credit default swaps, options trading and using the iron butterfly types of investment strategies, but I could get in on investing in many ways. I could invest straight forward by just getting some basic information and deciding what action to take “buy” or “don’t buy” –no science, and not much of a big deal either once you know a few simple basic things.
I would eventually come across a non-profit named Better Investing. This company offers education and training on investing basics for individuals that want to start investing in stocks and other investment vehicles. Once you want to go beyond the mutual funds, IRA’s and 401k plans and start looking at individual companies to invest in things are a little different. There are a few more details tom understand and evaluate your investments on when buying individual company stocks. Still, no science although the world would have you think there is some magical science to it. While it is the straight honest truth that you can just open a brokerage account online in a few minutes, link your bank account and start buying company stocks just like that. It is also true that you can do the same with a car, just walk in and buy it. However it would make a little sense to kind of understand what you’re getting into, the how and why to help make the best decision to fit your needs. This is where people get nervous and the hucksters take advantage by making people think investing at a basic stock by stock level is beyond their grasp. That they should be focused solely on mutual funds, index funds, bond funds and support the broker’s new “7 series BMW” funds. Yes, there are some things to be careful of and consider, however, so goes the same for choosing the right car with respectable loan terms and most of us have done that several times already. So when it comes to these investing basics and trying to learn how to measure up a company’s worth for your couple hundred to a few thousand dollars or so, the Better Investing folks are good at helping to understand the basics and move on to advanced concepts. Understand some very simple things like what is the P/E ratio or the EPS, why it’s important and how to evaluate it. Why and how to consider how much debt a company has, most companies have debt but it’s not a bad thing as much as how it’s being managed. What are the earnings that you sometimes hear reported on the TV news or radio, it can seem strange when they say “NIKE reported earnings of 23 cents this quarter, above analyst’s expectations of 20 cents”. I remember wondering, “How is that 23 cents significant?” and sometimes I still wonder a bit. For basic investor education and a little more check out http://betterinvesting.org/Public/Stocks/default.htm
Group Economicus. The-Money-Team of your own.
My confusion aside, Better Investing offers a good amount of education on the basics, how to get started and how to invest in individual stocks for the long haul. Long haul stocks that pay dividends, increase in value over time, and allow you to build a worthwhile portfolio that includes individual stocks. Beyond the evaluating individual companies and doing the collar cost averaging thing, there are the “Investment Clubs”. I found these to be particularly interesting as it allows you to seek out clubs to join or start one of your own. Yes, start your own little investment group with family, friends, coworkers or anyone that has some of the same interests in finance and investing. There are Investment Clubs based on gender, regional location, affiliation, interests and any number of other things as the central basis for the group. Better Investing will help you set up your own investment club from scratch and show you how to monitor, manage and maintain investments and profits accordingly for your investment club. Between the webinars, local group meetings you can attend in your area and the online education you are likely to get a good grasp of the basics. Good enough to begin selecting and investing in individual stocks based on their metrics that make them worthwhile to consider your hard earned money.
Investment Clubs can be much like hedge funds, Index Funds and Mutual Funds in their focus on a specific industry such as Oil & Gas, Apparel, Defense Contractors or Consumer Staples such as Proctor and Gamble and so on. Let’s say your club is interested in Real Estate, the investing focus surely can be geared toward owning and investing in the best REITS ranging from apartments to malls, whatever you want to focus on as an investment. Investment Clubs can focus on regions, emerging markets, the global economy or commodity stocks for precious metals such as gold or silver. When gold I up and high in demand your investment club is tied to the area of the market and possibly up too, conversely, down when it’s down also. Health Sector and pharmaceuticals, an Investment club can focus on the leading companies in healthcare such as Merck or GlaxoSmithKline, Technology stocks such as Apple and the list goes on to whatever you desire to build for your club. Google “Investment Clubs” and you’ll get good idea of how people are coming together and how they are investing together. Then, go start your own.
For more on Starting or joining investment Clubs check out http://milesweekly.com/46bn
Okay, so this sounds like some sort of push for Better Investing, but it isn’t. I did however take a class with them, learn how to track individual company stocks based on sales, growth, debt, free cash flow, enterprise value, P/E, EPS and other key metrics to make at least a half decent decision on whether to invest or not. I did compare some of their information with that of the gurus such as Jim Cramer and his first book “Mad Money” and other conventional wisdom on investing, which to me seems to steer everyone to some sort of fund for the most part. In the end, I found that it is extremely helpful to build a basic foundation knowledge set to even consider investing, whether it’s in funds, bonds, notes, options, individual stocks or your brother’s restaurant. You need to understand how the stock is trending much like if your brother has a hot hand for a short while that fades quickly, tracking the performance and history of a company is done kind of the same way. As far as the investment clubs, this allows you to play the same “Investment Group” game, just on your economic scale by picking a basket of stocks to invest in at your own pace and managing it damn near like your own mutual fund or hedge fund for that matter. Yeah, how cool would it be to build and manage your own hedge fund? Well you can and they’ll help you do it. So, this isn’t a push for Better Investing as much as it is sharing my own experience and encouraging others to do the check it out for themselves. You may try the online webinars, start or join an Investment Club or attend regional meetings in your area, either way you’ll come out ahead working with Better Investing. I’m telling you this is cool financial game for your life, check it out.