In it to win it for the long haul: here are some final words on managing your investment club.

Here are some final words on managing your investment club

Congratulations! If you have been faithfully following our series, then your club should be officially up and running. And you should have all the tools needed to build a prosperous portfolio.

Granted, some clubs get off to a shaky start during the first year of operation; there are bound to be disputes over investment picks and member participation. "Many clubs show losses or only small gains during the first year or two," says Thomas E. O'Hara, chairman of the National Association of Investors Corp. (NAIC) in Madison Heights, Michigan. "But as members become more knowledgeable and the amount of money under management grows, gains often begin to increase exponentially."

NAIC recommends that a club's investment objective should be to double its money every five years. To do that, the club's investment portfolio would have to achieve an average 14.9% compounded annual rate of return.

In 1995, the average club (which was about nine years old) had earned 12.3% over its lifetime. Which isn't half bad given that if you invested $300 a month at a 10% rate of return, you would accumulate $61,965.61 in 10 years. However, O'Hara says past surveys conducted by NAIC have shown the average club exceeding the 14% aim on many occasions.

Those clubs that survive the two-year start-up phase tend to do very well, adds O'Hara. In time, your club will discover what some 24,000 clubs have known for years: good research and regular deposits are all it takes to invest like the pros. Over the past decade, roughly two-thirds of all investment clubs have matched or beaten the Standard & Poor's 500 stock index, according to NAIC stats.

"The biggest reason that many new investment clubs fold within two years is because many members fall prey to a get-rich-quick mentality and they cash out early on, which creates animosity between members," explains Robert Lancaster, president of the seven-year-old New Freedom Investment Club in Durham, North Carolina. "This is why it is important that you form your club with like-minded individuals who have the same investment horizon," he adds.

New Freedom's 20-member club comprises mostly professionals, and some entrepreneurs, ranging in age from 25-45. The club's portfolio of small- and mid-cap stocks--valued at $76,000--earned a 31% rate of return last year.

O'Hara agrees with Lancaster's assessment that short-term trading doesn't work with a long-term undertaking. "As long as members keep in mind that running an investment dub is a life-long project, it is possible to keep your dub going for 20 or 30 year," he says. "The key is to just stay focused."

Lancaster says another important point is understanding the by laws. "We update ours annually," he points out. "Each year, you learn something new about the nature of the dub and things you have to deal with from a policy standpoint."

As you may recall from Part 2 of this series (November 1996), your formal operating procedures and bylaws should have provisions for when the dub ceases to exist and how payments are to be made to members. Ideally members should stay together for as long as the dub is in existence--well beyond retirement age. However. you should be prepared in case certain circumstances warrant that you terminate the club partnership.

Aside from sheer capital growth, investment clubs offer their members valuable experience that they can apply to a wide range of investments. Most club members learn to enhance the club's till as well as build their own portfolio. Having a personal portfolio doesn't mean you have to give up your membership in the club.

In fact, three members of New Freedom put out a national newsletter, Wall Streetwise, a quarterly publication which offers stock recommendations and advice on various investment styles. (Wall Streetwise costs $34.95 for a one-year subscription and $49.95 for two years; http:www.awa.com/softlock/tturner/ws. For more information, write to Wall Streetwise, P.O. Box 12451, Durham, NC 27709-2451; or call 800-419-1318; or fax [phone].

If you adhere to the investment principles set forth by BE and the NAIC, you will be able to accumulate enough wealth to finance your children's education, travel the world and avoid any money blues during your golden years.