Consider an Investment Club
It's Foolish!

by Vince Hanks (TMFElwood@aol.com)

NORTHVILLE, MI (Dec. 1, 1998) -- You've paid down your credit card debt. You've decided to forgo the underperformance of managed mutual funds in favor of owning a piece of the nation's most successful businesses. You've surveyed your financial situation and have decided that Dripping is for you. You're a Fool, no doubt about it.

Still, you're not quite sure where to begin, which companies should form the base of your Drip portfolio. I have four words for you, my Foolish friend. Plastic Fruit Can't Miss! Er, wait. Those aren't them. Let's try again. Consider an Investment Club!

There are tens of thousands of investment clubs across the states united in America. They typically consist of 12-20 members, who meet once a month, anywhere from local churches to schools to bookstores, and lately clubs have been popping up on the Internet like mushrooms after a warm, damp night. The Internet's popularity has naturally fueled the growth of new clubs by providing a medium by which virtually anyone can join a club if they wish.

At the meetings, stocks are presented for consideration by members, debated, and then voted on for inclusion in the portfolio. Not at all unlike what we're doing right here each night in the Dripfolio, minus the snacks and soft drinks. Whether the stocks are voted in or not, you can always use the research and analysis presented to consider additions to your own personal portfolios outside the club. Again, very much like we do right here on a daily basis.

If you're looking for a Foolish investment club, you may want to rap on the (Internet) door of the National Association of Investors Corp. (NAIC) or look for clubs that adhere to its core philosophies -- tenets so Foolish that you'd think they were torn right out of the 13 Steps To Investing Foolishly, had they not been around 43 years before the Fool debuted.

NAIC's four stated principles are:

1. Invest regular sums of money once a month in common stock. This helps you obtain a lower average cost on your investments.

2. Reinvest all earnings, dividends, and capital gains. Your money grows faster if earnings are reinvested. This way, compounding of your money is at work for you.

3. Buy growth stocks -- companies whose sales and earnings are increasing at a rate faster than the industry in general. They should have good prospects for continued growth, or in other words, they should be stronger, larger companies five years from now.

4. Invest in different industries. Diversification helps spread both risk and opportunity.

Keep your compass firmly pointed at those guidelines and your club is very likely to be a booming success.

Another aspect of investment clubs that makes them quite Foolish is the learning and sharing of information that occurs at each meeting. Each month members are encouraged to share any research they've unearthed about any particular stock, aspect of investing, or financial publication. One month you might share your thoughts and evaluation of an article you saw in The Wall Street Journal and another month a member may tear apart the balance sheet of Plastic Fruit Paradise, Inc. Many clubs book guest speakers occasionally, as well.

Investment clubs are not only a great way to learn about investing, they're also a tremendous way for you to get those you care about involved in their own finances. It can be that nudge that they need to begin to manage their own money once they see how fun and profitable investing can be. A good club provides the support and environment essential for newcomers to venture into a new world.

Drips are the perfect vehicle for investment clubs, especially in the early years. Generally, members contribute roughly $25-50 each a month. Pooled together, it's a nice sum to send to several companies each month as optional cash payments (OCPs). Like any portfolio, clubs can use a variety of investment methods -- Beating the Dow, Rule Breakers (aka the Fool Port), Rule Makers (aka Cash-King), etc. However, Dripping is a great way to get each month's funds into the market as soon as possible without incurring more commissions.

Okay, this all sounds great, you say. So, where do you begin? There are many steps involved in getting a club off the ground, but most are pretty straightforward. We do offer a brand-spanking new Foolish Guide for Investment Clubs over at FoolMart to aid you in launching your own club. You also may want to visit the Fool's Investment Clubs area.

If you would rather join an existing club, ask around both online and off. Maybe a friend or coworker is in one or is familiar with a club in your area. We have message boards dedicated to both the area you live in (Folly in 50 States) and to Investment Clubs in general. You can form or join a club right here with fellow Fools!

Most importantly, make sure your club is cooperative and enjoyable. Keep it fun, educational, and rewarding to all members. In other words, keep it Foolish!

Have a good night!


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FoolWatch -- It's what's going on at the Fool today.

12/01/98 Close

Stock Close Change JNJ 81 -1/4 INTC 115 +7 3/8 CPB 57 1/4 +1/8 MEL 63 1/16 -1/8
Day Month Year History Drip 2.79% 2.79% 31.19% 11.72% S&P 500 1.00% 1.00% 21.11% 23.54% Nasdaq 2.78% 2.78% 27.60% 25.72% Last Rec'd Total # Security In At Current 11/02/98 8.055 CPB $52.880 $57.250 09/01/98 9.727 INTC $80.238 $115.000 11/09/98 8.578 JNJ $74.090 $81.000 10/07/98 1.000 MEL $48.560 $63.063 Last Rec'd Total # Security In At Value Change 11/02/98 8.055 CPB $425.95 $461.15 $35.20 09/01/98 9.727 INTC $780.50 $1118.64 $338.14 11/09/98 8.578 JNJ $635.55 $694.82 $59.27 10/07/98 1.000 MEL $48.56 $63.06 $14.50 Base: $2200.00 Cash: $262.88** Total: $2600.55

The Drip Portfolio has been divided into 89.430 shares with an average purchase price of $23.482 per share.

The portfolio began with $500 on July 28, 1997, adds $100 on the 1st of every month, and the goal is to have $150,000 in stock by August of the year 2017.

**Transactions in progress:
10/24/98: Sent $40 to buy more INTC.
11/24/98: Sent $100 to buy more MEL