The investors next door: trying to figure out the best moves in today's market? Listen to the strategies from members of some of the nation's leading investment clubs - Investment Roundtable - Panel Discussion

Black Enterprise, Oct, 2002 by Matthew S. Scott

IT HAS BEEN A TOUGH MARKET FOR THE SMALL INVESTOR. SOME DON'T EVEN BOTHER TO OPEN their quarterly 401(k) statements, frustrated by their eroding nest eggs. Moreover, investor confidence has not been revived by Senate hearings on shabby corporate accounting practices or handcuffed execs doing a "perp" walk before television cameras. Not even President George W. Bush or Fed chairman and market oracle Alan Greenspan has had any effect on a market noted for sucker rallies and false bottoms.

We have assembled what we call "the investors next door"--individuals who seek to build wealth through investment clubs. They represent top stock-pickers from leading investment clubs: Bernadette Johnson, past president of the Raleigh-Durham, North Carolina-area-based Black Women Investment Corp., a 13-year-old organization comprised of black women between the ages of 30 and 55; Marcus Plump, chairman of Millionaires-Thru-Christ Investment Club, an 18-month-old club whose working-class members belong to Salem Baptist Church in Chicago; Okorie Ramsey, treasurer of the San Francisco-based investment club Awareness To Action Investments (ATAI), an organization mostly comprised of members of the National Association of Black Accountants; Clark Grain, treasurer of the 19-year-old Zenith Investment Club in Framingham, Massachusetts; and Baunita Greer, a director of the New York chapter of the National Association of Investors Corp. (NAIC), an organization that helps develop investment clubs and a member of New York-based CMG Investment Club, which is composed of several professionals. Our editorial team discussed with them their strategies for collective and individual wealth building.

BLACK ENTERPRISE: How do your members feel about investing in this tough environment and have they been able to maintain their financial commitment to investing?

OKORIE RAMSEY: As accountants, we are very positive about the market and what it can do. We've seen the downs and the ups. Actually, I would say that our financial commitment is stronger. As far as the impact of the market on our investments, we've probably lost about 20% of our initial investment from inception. But we believe this is a time to buy the right stock. You shouldn't just buy anything. They're all cheap right now. By knowing where these companies can go and [by] doing the research, you can still find good deals and get a good return.

MARCUS PLUMP. Our commitment has kind of fallen off a bit. The treasurer and I have had to be motivators because we're working people and what we put in could affect whether someone is going to eat. Basically, we've had to inform [our members] that right now is the best time to buy.

B.E.: Has your membership held steady?

PLUMP: We were up to 18 members. We went down to about eight, but now we're back up to about 12. We're a God-based club and we're looking at Proverbs 13:22, where a wise man leaves an inheritance to his children's children. That's why we started [the club]. If my grandfather had left me a quarter of a million dollars, would I be in the same situation that I'm in right now? We have let [members] know that this [bear market] is a test.

BERNADETTE JOHNSON: Our financial commitment has held up very well. We've been blessed that our partners' job situations have been fairly stable throughout this period. As far as financial commitment, we've kept our minimum fairly low to $35 a month plus some dues and fees to take care of incidentals, mailings, [etc.]. We did not want the club to be another wolf at the door.

But also there is a commitment to the club so if someone were to lose a job or hit a tough spot, and were not able to meet our financial commitment, we would [first] ask that she let the president know. Second, [we ask members to] maintain the rest of their commitment to the organization [by] following their stock and helping the club in other ways because this is a long-term commitment for us. We wouldn't say, `Well, you missed three payments so you're out.' We would work with [the individual to create] something that is workable for the long haul.

BAUNITA GREER: We have seven members and haven't lost any. We recently had a meeting. Our group is comprised of one very conservative person, two very aggressive people, and everyone else in the middle. We do quarterly reviews of our portfolio. [Right now] we see buying opportunities. We're re-evaluating a lot of stocks that [sold at] premiums before to see if this is the opportunity for us to get in.

CLARK GRAIN: Well, we haven't lost any enthusiasm. In fact, we've added a new member during this market fluctuation. We have 16 [members] now. Everyone was a highflier during the mid-90s. We made one fundamental mistake, [though]. We did not pay attention to the charts. We've lost about 30% of our value. We could have probably lessened that to 10% or 15% had we paid attention to the charts. The one lesson we learned [is that] there is a time to sell--even with your favorite stock the one that has been making beaucoup money for you. In the past, we have held no more than 1% cash. All of [our portfolio] had been in equities. These days, we have 35% of [it] in cash. We're just waiting for the right moment to pounce on a stock that we think is going to appreciate. And we've actually made some purchases and have done reasonably well, but we are very, very careful now. It may take two or three meetings to even think about buying a stock. But that means that everyone has done a lot of work.