The Beardstown Ladies made ‘investment clubs’ a household term a few years ago when they published their first book, “Beardstown Ladies’ Common-Sense Investment Guide”. While their four books probably made them more money than their investments, their real legacy might be the interest they created in women’s investment clubs.

Investment clubs, groups of 12 to 20 people who come together for fun, education and profit, started about 1900. According to the National Association of Investment Clubs (NAIC) some clubs have been in existence more than 30 years and have accumulated assets of $1,000,000 or more.

Women have found these clubs to be a particularly valuable education resource for learning about investments. While women tend to live longer than men and are likely to need more savings in retirement, until the last several decades they have remained on the sidelines when it came to making investments.

That is rapidly changing. Contrasting studies in 1990 by the New York Stock Exchange (NYSE), and in 1998 by the Nasdaq, point out that the number of female investors grew from 37% to 47% in eight years. By 1998, 45% of the female investors surveyed said that they’re the primary investment decision-makers in their households.

NAIC studies show that between 1960 and 1996, the percentage of NAIC member clubs that were all women skyrocketed from 10% to over 50%. They show that three out of four new clubs formed are all women. As more women become active investors they are turning to clubs as a way to learn and invest.

The NAIC reports that the number one goal of all-women clubs, ahead of turning a profit, is to learn about investing. They are motivated by a genuine curiosity and a desire to learn—or because they realize that it’s vitally important for them to be able to tend to their own or their family finances. A haunting statistic provided by a recent Bureau of the Census survey shows that 75% of the elderly poor in America are women.

It takes only a few persons interested in the potentialities of an investment education to start a club. The NAIC, established in 1951 for the purposes of educating individual investors and encouraging investment clubs, publishes a wealth of information on their web site,
http://www.better-investing.org/ for those interested in forming a club.

Investment clubs usually do not have to be regulated by SEC rules providing they do not sell interests in the club as a security or investment contract. Further, if all members actively participate in deciding what investments to make, interests in the club would not constitute ownership of a security regulated by the SEC.

Since the club requires a bank account and a brokerage account in which to make deposits, and purchase and sell investments, the club will likely be required to have its own taxpayer identification number which can easily be obtained from a local IRS office.

Members decide on investment choices as well as club administrative matters by vote. Each club should adopt bylaws as well as a partnership agreement that spells out the voting method. The two most common ways to vote are: one member-one vote, or a weighted vote based on ownership percentages.

Bruce Fenton is a financial consultant, a writer, and the Managing Director of Atlantic Financial Inc. Bruce welcomes inquiries, comments, and questions. He can be reached by contacting The Fenton Report.