Investing > Stocks/Bonds

Baby boomers moving into investment clubs
DAVE CARPENTER, AP Business Writer. Associated Press.
Copyright Associated Press

CHICAGO (AP) _ Business, marketing, real estate, entertainment _ baby boomers have set the trends in all those areas. Now they're becoming the dominant force in America's investment clubs.

And it's not just that they're getting older. Boomers, experts say, are joining investment clubs partly because of a need to know more about investing as they're increasingly required to manage their retirement accounts.

"Suddenly it has dawned on baby boomers that they need better investment education because companies have expanded their 401(k) offerings," said Dorothy Rauschelbach, a director of the National Association of Investors Corp. "The consciousness level has been hugely raised."

Once the near-exclusive domain of men in or near retirement, investment clubs have increasingly become a gathering place for boomer men and, notably, women. The average age of the 500,000 members of investment clubs sponsored by the NAIC has dropped to 53 from 60 a decade ago.

What first helped draw a younger crowd was, of course, the bull- market run of the mid- to late-1990s that helped make stock picking one of the nation's favorite pastimes. Hang out with your friends and neighbors, make easy money _ it seemed anyone could turn a profit.

Today, the markets are down and so is investment club membership. The number of NAIC clubs, which comprise the bulk of those operating in the United States, has slipped from a high of 37,100 at the end of '98 to about 32,500 today.

The decline, however, has been slowing and is likely to turn around if a full-fledged economic recovery takes hold. And an informal survey of investment club officials in several regions found no anecdotal evidence of flagging participation recently by boomers, who turn ages 38 to 56 in 2002.

"More and more younger people, in their 40s and early 50s, have been signing up," said Jonathan Strong, membership manager for NAIC, a nonprofit educational investment institution based in Madison Heights, Mich. "Most new members are in their mid- to latter baby boomer years."

Boomers are perhaps the most investment-conscious generation ever _ and, as the richest, one with enough invested to know they'd better look out for it.

The take-charge attitude has been particularly noticeable among women, whose involvement in investment clubs grew dramatically in the '90s. Women-only clubs now comprise 54 percent of the total, according to NAIC, meaning there are more than 17,000 such groups.

Susan Hertel, 53, joined an all-women's club in Phoenix called Market Movers five years ago and has stuck with it through boom and bust. While profits have been scant lately, she and her 20 fellow members, virtually all baby boomers, are not discouraged.

"We laugh and make jokes about it," she said of the market downturn. "It's not nice to see things go down. But I think we always figured we're in it for the long haul, and things are going back up."

Besides, she notes, they're always looking for ways to learn more about investing. The decline provided a clear lesson: They needed to be more diversified.

A member of another all-women's investment club in Phoenix, Susan Young-Floyd, said most joined because they heard their husbands and other women talking about stocks. They thought that they, too, should take advantage of an opportunity to make money.

"There was a feeling of fear at first, of 'Let's not do anything foolish,'" said Young-Floyd, 44, who joined Sisters in Stock in the fall of '99. "There was excitement, and fun _ it was like going back to school.

"As we got to know what we were doing, it was, 'Oh my gosh, there's so much to learn.' Then everything went bad in the market."

Now the exhilaration is largely gone, but almost no one has quit and a half-dozen new people have shown up at recent meetings.

"We're a little cautious now," she said. "But most people aren't giving up."

Face Value - How much a bond is worth when it comes time for the company or government that issued it to pay the investor.

Prospectus - A company's formal offering of stock, bonds or other securities that gives investors information about the company's prospects. Also, a document all mutual funds must prepare that describes what they invest in and how they do business.

Mutual Funds - A pool of money that invests in many companies, allowing investors to spread small amounts of money across many securities.

Dollar Cost Averaging - A way to make money by investing a small amount every week or every month in the stock market or in mutual funds.

Diversification - Buying different types of investments - some stocks, some bonds, some mutual funds - in order to reduce your chance of losing money. If stock prices go down, bond prices may go up, and you won't lose money.

Bonds - An IOU from a company or a government. You give the company or government some money and they promise to pay you, over time, the amount plus a little bit more. The little bit more is called the interest rate.

Laddering - A plan to buy bonds that are paid back over several different time periods. So, instead of buying one $10,000 bond that will be paid off in 10 years, you might buy five $2,000 bonds that will be paid off in two, four, six, eight and 10 years. This protects you from big changes in interest rates.

Load - The fee you pay to buy shares of some mutual funds. It's also called a sales charge. Many mutual funds do not charge these fees. They're called no-load mutual fund.


The tips on this website should be considered food for thought only. Lendingtips.com is a clearinghouse of ideas, not a professional adviser. Before any important decision, please consult the appropriate professionals (lawyer, accountant, real estate agency, broker etc.).