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If your mom is like many moms, she wishes she knew more about investing. She feels pangs of discomfort when passing over the stock listings in the newspaper. She wonders whether your family's money is parked in the most effective places.
It doesn't have to be this way, though. By this time next year, your mom could become an investing enthusiast -- thanks to you. What better gift on Mother's Day than a nudge in the direction of financial savviness?
The path to financial enlightenment
The path I'd like to recommend is an investment club. Many mothers -- as well as fathers and non-parents of all ages -- have found investment clubs to be enlightening, fun, and profitable. In a nutshell, such a club typically involves six to 16 people who meet monthly, contributing a modest sum each time (say, $25 to $50 each), and investing their money together, after research and discussion.
There's a lot to learn about clubs and many ways to go about forming one. Here are just a few things to consider as you begin:
- It can be best to form a club with others at your investing level, even if you're all beginners. Otherwise, club members might rely too much on the most experienced members, shortchanging their own learning.
- Investment clubs offer great leverage. If you think you can only really study two or three companies per year, but you have 10 people in your club, together you might be able to study 20 to 30 companies.
- You can make your club social by incorporating meals or outings with meetings, and you can boost its educational value by dividing the reading of a host of books, magazines, and articles among members, with everyone reporting back to the group what they've learned.
- Set expectations early, and make sure everyone is on the same page. For example, do you all want to do a lot of learning and invest mostly in familiar big companies for the long haul, or do some of you want to try hopping in and out of small companies frequently, in order to try and make some quick bucks? These are not very compatible approaches.
- Remember that if the idea of pooling money with others is daunting, you can set up your club to operate like a regular club, but just stop short of pooling money. Research companies together, discuss them, and then go home and buy or don't buy in your own portfolios.
Some investment clubs fizzle because of flagging interest, while others remain in force for decades, with waiting lists of would-be members. Take some time to structure yours carefully, and you'll up your odds of doing rather well.
If your mom wants to learn more, direct her to our Investment Club nook and to the Better Investing website. The folks at Better Investing have guided many investment clubs for decades. According to one of their recent reports, some of the companies that are most frequently found in club portfolios include Home Depot
And finally, another good gift for Mom would be our Motley Fool Green Light newsletter, which is chock full of money-saving tips, scoops on great deals, and investing lessons. I invite you or your mom to take advantage of a free trial of Green Light. I think you'll like what you see.
Longtime Fool contributor Selena Maranjian owns shares of Home Depot, Microsoft, and General Electric. Home Depot and Microsoft are Motley Fool Inside Value recommendations. Try any one of our investing services free for 30 days.
