Anyone familiar with the investment world should remember The Beardstown Ladies, an investment club that made the member to become a celebrity. The club members are 14 female with an average age of 70. They have become famous for their statement of investment gains with the earnings yield of 23.4% per year for 10 years whereas the DJIA only holds 12.1% growth during the same period. In short, these women claimed that they can reap the benefits two times the performance of the stock market and most mutual fund shares in the U.S. during this period.
However, after an audit from Price Waterhouse published, their popularity drop to zero. Price Waterhouse report that their investment gain was only 9.1% per year, far below the 23.4% myth. So the actual profit earned by these ladies is still below the average performance of the stock market. Where did they go wrong? apparently, these women were miscalculating their routine deposit as a profit. As an supplement, NAIC (National Association of Investor Corporation) done a survey on 166 investment club all accross America. The result were surprising, most of investment club performance is lower than most mutual fund shares in the U.S. by 60-70%.
But one should learn from the success story of Klondike Investment Club of Buffalo. Having 18 members, all of their investment decision is based on rational analysis and deep research, not based on emotions or issues on certain company's stock. The important thing to learn is, even if an investment club is founded to learn about investment and gain benefits from it, decision made inside the club should be made on research and good intuition. Collectivity on a club is extremely useful to determine which one is the best option. Don't be too cocky if you are already a member of an investment club as you don't want the Beardstown Ladies' mistake to become yours.
However, after an audit from Price Waterhouse published, their popularity drop to zero. Price Waterhouse report that their investment gain was only 9.1% per year, far below the 23.4% myth. So the actual profit earned by these ladies is still below the average performance of the stock market. Where did they go wrong? apparently, these women were miscalculating their routine deposit as a profit. As an supplement, NAIC (National Association of Investor Corporation) done a survey on 166 investment club all accross America. The result were surprising, most of investment club performance is lower than most mutual fund shares in the U.S. by 60-70%.
But one should learn from the success story of Klondike Investment Club of Buffalo. Having 18 members, all of their investment decision is based on rational analysis and deep research, not based on emotions or issues on certain company's stock. The important thing to learn is, even if an investment club is founded to learn about investment and gain benefits from it, decision made inside the club should be made on research and good intuition. Collectivity on a club is extremely useful to determine which one is the best option. Don't be too cocky if you are already a member of an investment club as you don't want the Beardstown Ladies' mistake to become yours.
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