Investment clubs offer a helping hand

The economy has slowed and investing in the stock market isn’t the financial bonanza it once was, but individual investors still are diligently researching firms and seeking undervalued stocks for purchase.

Investment clubs aim to make this task more accessible to casual speculators, and they’re popular here. The Puget Sound region is home to more than 1,200 National Association of Investors Corporation (NAIC) associated clubs, according to Linda Lewis, co-director of the NAIC Puget Sound chapter.

Clubs typically have about a dozen members, and invest money raised by monthly membership dues.

“It gives you more eyes to scan the market,” said Gary Krancus, president of the Liberty Bay Profiteers investment club of Kitsap County. “The interdisciplinary group we have means there are people from different sectors who know about interesting investment opportunities.”

Clubs provide educational opportunities and a safe environment for small-time investors, said Russell Park, co-director and board member of the NAIC Puget Sound chapter. “Hot tips” are scrutinized by research, and groups vote on which stocks to invest in.

“Basically the dues we charge are $25 a month, then we do our research. However anyone finds out about a company is fair game,” said Krancus, whose club is in its fourth year.

The clubs’ main goal is education, Park said, but they also aim to double the value of an investment in five years.

In addition, NAIC investment guidelines urge club members to invest regularly, to reinvest dividends, to invest for the long term, to invest in solid growth companies and to focus on diversification, according to Lewis, also a program analyst at the Naval Undersea Warfare Center at Keyport.

The recession has had a chilling effect on the Profiteers, Krancus said, and the group is working to adjust its portfolio to accommodate harsher market conditions.

“It sobered us up, like it did most investors, to realize the bubble effect. It has not been as much fun. It has been harder for members to research because there are so many losses,” Krancus said.

The Profiteers, made up mostly of couples, are vested heavily in technology stocks. This has proven a liability during a recession in which tech stocks have been among the biggest losers.

Of the 13 stocks the profiteers own, 37 percent are hardware or software companies. Cisco Systems was the club’s biggest loser last year, and Washington Mutual Bank was the best investment — it nearly doubled in value over four years, Krancus said.

“At the time we started, tech stocks were hot. We got sucked into the tech market, but we got burned with the rest of them,” said Krancus, a computer scientist at Keyport and adjunct math teacher at Olympic College.

The group is now working toward greater diversification, Krancus said, and despite occasional losses the club made out reasonably well last year.

“We didn’t do so bad. We beat the Standard and Poors index,” Krancus said. The Standard and Poors index — or S&P — is a cross section of stocks that exemplify larger market performance.

One of the challenges investment clubs face is working as a team to maximize earnings — a matter which is complicated by having large sums of money at stake, Park said.

“Like with a family unit, there are club dynamics that seem to present a challenge,” said Park, who manages finances for the tool shop at Puget Sound Naval Shipyard.

Added Lewis, “The larger the group, the larger the problems.”

Another challenge is getting people to use the numbers-based NAIC approach to rate stocks. Many are intimidated by the process, Krancus said.

Some people want to invest their money but don’t want to do their fair share of research — they would rather defer to others to make sure they money goes to the right place.

“It is not a free ride,” Krancus said. “It is like anything else, you get out of it what you put into it.”

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