How to make your money work for you: investing is one answer to a more stable future

Ebony, Jan, 1996

WHEN Patricia Hanes a McDonald's or a Sara Lee blueberry muffin, she's not only eating something she enjoys, she is also investing in her future.

Hanes owns stock in these companies, as well as eight others, including Volvo and AFLAC. Since she and eight of her friends in suburban Chicago formed an investment club in March 1994, they have enjoyed a 22 percent return on their ventures.

Although the group members are relatively young, the money they earn will help start their retirement nest egg. It's a comforting thought for them and a growing number of Blacks who have tossed their hat into the investment ring, buying and selling stocks and bonds, preparing for their future in ways once reserved almost solely for well-to-do Mutes. "I have always paid attention to what the White people around me were doing, especially the White males," Hanes says. "I saw it as a way that people made money."

Whether you're fresh out of college, a newlywed couple or reaching retirement age, it's never too late (or too early) to invest and save money. And you don't have to be rich to do it. Investing $100 a month at a 12 percent rate of return at age 25 will net $1.3 million over 40 years when you're ready to retire.

In fact, more people have become millionaires through saving and investing than through spending money to become business owners. And while owning a business is risky and is a 24-hour-a-day job, stocks, bonds and other investments do the work for you and are all but guaranteed to grow.

Professional investor Yvonne Kinnon gives this advice on a daily basis. Many times she finds that Blacks think investments--with names like mutual finds, CDs, IRAs and 401(k)s--are too complicated. She tells the story of her encounter with 12 Black cab drivers who together were saving $12,000 every month, $1,000 each. "And they were only putting it in the bank," says Kinnon, a senior account executive with Chicago's Waddell "Reed. When your money's sitting in the bank, it's not working as hard as it can for you."

Experts say there's nothing complicated about investing, and with talk of stock market reforms aimed at simplifying the process, it could become as easy as depositing money into the bank. Many employers are even offering plans which automatically invest money straight from paychecks, eliminating the middle man--YOU--and your temptation to spend it on something else.

In order to make the right investment choices, you must do your homework. Before investing any money, experts say, you should read everything from financial publications to investment-oriented books. "If you're going to be a good investor, you need to take time to at least start to read regularly," says John W. Rogers Jr., president of Ariel Capital Management Inc. "Before you start making decisions, you need to have a firm understanding."

The next step is to set long-term and short-term goals and convey those goals to a good stockbroker or financial planner. You will know you've found a good investor if he or she follows this rule of thumb: take more risks if you're young, less if you're older. Usually the bigger the risk, the bigger the payoff, but, unfortunately, the bigger the chance of a financial crisis, something older people can't afford. A stockbroker will usually invest your money in a mutual fund, where it will be combined with other people's money and allotted to different investments.

But for those who want to do their own research and investing, joining an investment club may be the answer. These clubs are being formed nationwide by friends, co-workers or family members, who alone wouldn't have enough money to be serious investors, but by pooling their money--sometimes as little as $25 each per month--become a powerful investing block. Within a few years the worth of the typical investment club is more than 100,000.

Some investment clubs seek to make enough money for its members to retire comfortably, while others hope to strike it rich. "They are good if everyone involved has the same goal in mind," Kinnon says. "It's a way people can invest in the market without a lot of risk. And it's an excellent way for Blacks, in particular, because they can pool their money together."

Another investment option is real estate. Like many African-Americans, Tim and Carolyn Butler of Greenville, S.C., have used real estate to make their money work for them. The couple enjoyed a 25 percent return from their first house, which they owned for seven years, and hope to make a larger profit from their second house, which they purchased about a year ago. Although he is a relief specialist at a tire assembly plant and she is a registered nurse, they, with their two sons Joshua, 10, and Justin, 7, live in a neighborhood of accountants, engineers and other white-collar office-types.

"I've come to realize that we can afford anything we want," says Carolyn Butler, who credits God with giving them wisdom to save and invest their money "It's not how much money you make, it's what you do with it." Her husband adds: "More Blacks need to invest money in houses, real estate and other investments, instead of buying cars and other things that depreciate."