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BetterInvesting.com CEO Kamie Zaracki and Buckingham Asset Management Wealth Advisor Dan Solin on the pros and cons of investment clubs for investors.
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Investment clubs when a group of individuals pull their money and make investments together.
They became very popular in the late 1990s when -- stock market took off but.
Recently their popularity is on the decline investors are just too afraid of stocks joining me now.
-- Iraqis CEO of better investing data organic Dan -- a wealth advisor with bucking an asset management author the smartest money book.
You'll ever need -- the above its great to have you here.
So I wish you folks the decline in membership in these investing clubs.
In 1998 there were 400000 members to when he twelve just last year 39000.
I -- the numbers are just going down here can't -- -- you're very familiar with these clubs what's going on here.
Well you know you -- It's changed since the ninety's and that that Internet has just taken off -- so one of the main reasons that existed for clubs the ability to.
Share the workload to.
-- in terms of getting information in evaluating stocks and and finding them -- and and also that the cost actually purchase the stock -- that whole dynamic has changed.
And so now individual investors can you going do that themselves however one of the main reasons for investment clubs still exists and that is it is a great way to learn about stock investing.
And could you can still share the workload Dan Afghani -- Well she's right I think about the reason why the number of investment clubs is declining the Internet has had a real impact but I don't think she's right.
That it's a great way to learn about stocks -- all the data I've looked -- indicates that the returns of members of investment clubs.
Significantly.
Underperform and S&P 500.
It's a nice social way I can see a lot of benefits of people collegiality.
And.
Doing something that appears to be productive.
But the concept is flawed there's just no evidence that -- like minded people get together and talk about our stock market that they learn any.
You know brings to mind the Beardstown ladies remember them.
That analysts -- word rock stars these women near retirement I think we're all we're tired.
-- invested together and ultimately it turned out that they hadn't been computing and returns correctly.
Could you active Beardstown ladies today is there you know we've got the market.
Cooking again it's really going canny.
Is it possible it will see a reinvention of this.
May -- just on the web.
Out absolutely and -- I would say -- still am.
I -- one of the things -- better investing teaches our members is how to select quality stocks and how to evaluate them and also the environment of -- of an investment club really gives you.
The moral support that you need to really stick to the investing principles and the methodology that we teach that we teach our members.
Well -- I -- opposing ideas.
I gotta tell you can -- I think it's great but I think the reason that investing clubs are popular doesn't have to anything to do with your values which all sounds sound.
I think the problem is that people lost faith in stocks they got killed.
After the financial crisis they became not to trust stocks and then we had some insults along the way like.
The flash crash for example and insider trading -- mean dealing a look at that stuff is it any surprise that it's taken people so long to get back into stocks even though the market's been on.
Buyer for the last.
Year year and a half.
-- you make some very good points area and they in my experience people have lost confidence they feel that the game is rigged against them and there's a lot of merit to that.
I think people are just really nervous the volatility make some very nervous.
And unfortunately there is no science and I'm aware of the permits people to pick stocks -- will outperform so if there like me like -- -- investing and wasn't really sophisticated everything I've -- went down everything I sold.
Went up it's very frustrating for.
You know if you want to underperform you can just take anyone of a number of mutual fund managers out there that they don't get it sometimes don't think they index is either.
And that's another thing -- when you look at this so many people are married just buying the index.
The doing a mutual fund album due in ETF and they figure if I can just do what the market does maybe that's okay what's wrong with that analysis.
Well what's wrong with that analysis says that there and they're not actively looking for the stocks that can outperform the market and that's what our organization better investing.
Teaches over that -- sixty years that we've been around.
We've taught over five million people to become successful lifetime investors so the methodology does work.
And I would argue that a better investing member when that stock market went down in 20082009.
-- you're on a buying spree.
And a lot about investing and how we're doing very well in their portfolios right now.
Very ago and -- I've I've spent a lot of time in the last few years thinking I was really stupid for being invested in stocks and I feel so much better day stand.
Last word here it.
Talk to people out there individual investors who may -- They're thinking maybe this is just whatever is going on in the stock market now been ignored because it's noise -- it's it's.
It's not a safe place for me to invest what would you tell them.
I would tell them that they should always be invested in the stock market but in the right way they have to determine their asset allocation and pick -- globally diversified portfolio.
Of -- management -- index funds and the problem with any methodology.
Whenever it when anybody tells you they have a methodology for beating the markets ask them to show you the data show you peer reviewed data.
Because I just can't find -- -- people who invest.
The way I indicate you should invest in all of my books and up in the top 5% of all professionally -- Well well there's a big claim that we can all check out that -- check it out thanks for coming on the both in the EO Dan and -- really appreciate your time interesting conversation.
I just hope people get back in the market that I think everybody should be in stocks to some degree.
Thanks so much guys thank -- that are -- They do you still.
