Wednesday, February 27, 2008

The Beardstown Ladies Common Sense Investing Guide

The Beardstown Ladies Common Sense Investing Guide by the Beardstown Ladies

When you think of your grandma do you associate her with being savvy with the stock market? This group of 16 women aged primarily in the 50 to 80 year old range began an investment club in the early 1980s for the purpose of learning more about the stock market and as a good social outlet. Among the group was a school principal, a secretary, a pig farmer, and assorted other professions.

Some of them had a general understanding of the stock market prior to meeting together and some did not but all of them gained a much better understanding of investing and business in general over the course of the club meetings.

The structure was such that they met once per month to discuss various companies and the pros and cons of investing in them. They used various financial metrics on income statements, balance sheets, and analyst opinions to make informed decisions about stocks to invest in. Each member contributed $25 per month to the club and when enough money had accumulated shares of stock were purchased.

Each member of the group was assigned a company to track and perform research on through various methods such as observing local businesses like Walmart, reading the Wall Street Journal, watching financial shows on television, and the nightly news.

From 1984 to 1993 they claimed to have earned more 23% in the stock market but later audits revealed the actual percentage to be closer to 9%. Regardless of the actual return the women became substantially more knowledgeable about the stock market and much more savvy about investing.

The club also provided them with a great social outlet where they swapped recipes and stories in addition to investing money. Many of these women were widowed and the club gave them a great deal more confidence when managing their finances.

The first half of the book describes the club structure and how they originally started and the second half deals primarily with their investing principles and how they went about selecting stocks to buy, hold, and sell. Interspersed throughout are the ladies personal comments about various investing and other topics. There is also a recipe section towards the end of the book.

This book provides a good vehicle for learning how investing clubs work as well as general tips on growing one's knowledge of the stock market and how to evaluate individual stocks. The beginning investor would do well to first thoroughly research mutual funds and their benefits prior to investing in individual stocks.

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