INVESTMENT CLUBS: TURNING NOVICE INVESTORS INTO SAVVY INVESTORS

Two independent businessmen, a newspaper executive and a retired manager of a giant retail store, gather for a special meeting on a weekday night.

It's 5:15, and each of the 15 people at the meeting have a briefcase, which contains a number of portfolios -- stock portfolios.

The group -- the 515 Investment Club -- is part of a growing number of financial investors who have elected to form an investment club. The meetings of the 515 group, held one day each month, are aimed at gaining an understanding of an increasingly complex market with the help of others.

Members agree that it's a great way for novice investors to become "savvy" investors.

"We bounce ideas off one another," said Harry Rediger, recently retired manager of JCPenney in Cape Girardeau. "We have a diverse group, and all are interested in the stock market. The meetings are learning experiences and teaches the members the ins and outs of investing."

Investment clubs, members agree, tend to create a more market-savvy investor, as the members tend to get more involved and study the markets.

The 515 Club uses the service of a stock broker.

Investment clubs have become popular in the United States.

The number of clubs registered with the National Association of Investment Clubs recently passed 22,000, triple the 7,600 clubs of four years ago.

Investment clubs usually consist of 10 to 20 people, who pool assets to invest in a portfolio of stocks. Each person of the club contributes a set amount regularly, typically $10 to $100 a month, and each member is obligated to do some research on prospective investments.

Clubs usually meet once a month.

Advocates of the clubs say they enable beginners and people with limited resources to participate in the markets and pay lower commissions.

According to a recent survey by the NAIC, most clubs report an annual return of 12.3 percent annually, compared to the 10.1 percent of the Standard & Poor's (S&P) 500. The survey found that 45 percent of the clubs outperformed the S&P.

In many cases, members of the club also start to develop their own personal investment portfolios.

Investment clubs are not "for men only." Forty-one percent of the NAIC-affiliated clubs are all-women clubs, which, by the way, outperform all-male clubs.

Men, say the NAIC, are more prone to invest based on tips and to seek more short-term profits, whereas women tend to carry out more thorough research and invest for the long term.

One women's club, "The Beardstown Ladies Illinois Business and Professional Investment Club," was one of the first investment clubs. The club, which gathers monthly to talk about recipes, top stories of the month and stocks, made investing look so easy, that books have been written about the club.

The Beardstown Ladies -- a 16-member club -- starting investing more than a decade ago and for the first 10 years averaged a 23.4 percent annual return on their investments. That included a whopping 59.9 percent return in the stock market in 1991.

Two books have been published about the Beardstown Ladies, -- "Beardstown Ladies Common Sense Investment Guide," and "Beardstown Ladies Stitch-In-Time Guide to Growing Your Nest Egg."

Learning about investing is as "easy as baking an apple pie," say the women, who meet the first Thursday of each month.

But don't expect everything to be easy. Investment clubs are not a route to easy money and can be a frustrating experience, say people who have been involved in them.

"It's not just showing up at a two-hour meeting every month," said one investor. "You might have to do six hours homework beforehand."

And about half of all investment clubs fail within 18 months, because of a "get-rich-quick" mentality. A lot of people get frustrated because they don't realize how long it is going to take to make money.

Don't expect a club to be profitable for at least the first year, or two, said NAIC spokesman.

The NAIC recommends a goal of 14.9 percent a year -- enough to double the value of a clubs's assets every five years. But even a conservative 8 percent return over the long haul would be an "excellent result."

The Beardstown Ladies claimed an annual return of 23.45 percent through 1994. The Beardstown Ladies range in age from 44 to 90.

Investment clubs typically invest regularly, regardless of the market outlook, reinvest all dividends, stay fully invested and diversify.

Like the idea of getting together with friends and associates to pool investing talents?

Start an investing club. Following are some suggestions from the NAIC for establishing a club:

-- Keep membership to a manageable number. The best size for a club is between 10 to 20 members. Larger clubs may find it hard to reach decisions, and small clubs may not accumulate enough cash to build a diversified portfolio.

-- Keep contributions reasonable. Most clubs require members to contribute $25 to $50 a month, after an initial input of $100, or more. that's enough to make regular stock purchases without straining members' finances.

-- Make sure everyone is prepared to participate. Most clubs require members to suggest purchases and do research on them.

-- Make sure everyone has similar goals. A the first meeting, interested investors should agree on some clear objectives.

-- Select a broker, for advice, or for placing orders only.

-- Get other professional help. For legal purposes, clubs must be registered as a business, usually partnership, in which each member is taxed as an individual.

-- Invest every month.

-- Establish a goal. Many clubs establish a goal of doubling the investment within five years.