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Family investing for fun and profit.

A family that saves together stays together. This may not be the gospel according to financial wizards, but family-affair investing does have its advantages.

For one, collective investing allows family members to pool their resources. So, instead of individuals buying a handful of stocks for $100, a family of five could purchase a round lot at $2,500, for example. Members would also have a greater variety of mutual funds to chose from, since the minimum deposit for many funds starts at more than $2,000.

Second of all, this would be a great learning tool for the youngest members of the clan. "You can start to inculcate in them some important investment knowledge," says Jonathan D. Pond, NBC's Today show financial planner and personal finance correspondent. "They will learn several things, the most of important of which is the value of saving. The earlier the better. And they will begin to understand the miracle of compounding."

Maximizing one's savings by forming a group isn't new, of course. Culturally based savings plans have existed for years. One that many of us are familiar with is a susu, whose roots stem from the Caribbean.

In a susu, each member contributes a set amount of money (usually at least $100) each month. And at the end of every month, a different person receives the entire pot. So, if there are 12 members, each person gets the money at least once throughout a 12-month cycle and twice if it's six people.

A more formalized way families have accumulated wealth is by forming an investment club. Similar to a susu, members pool a set amount of money each month. But instead of going to an individual, the money is used to buy securities (see "Investment Clubs Outperform the Experts," June 1992). Any given member's portfolio is determined by the actual amount he or she invests and the cumulative return for the total pool.

You don't have to be a rocket scientist to save money. However, if you do plan on playing the stock market game, there are a few things you should know. To help you and your family get started, here are some basic portfolio-building tips.

What Should You Buy?

A common sense rule is to invest in things that you know, enjoy and are comfortable with. This way, you'll have a better feel for that industry and company. You will have to become conscientious about the products that interest you.

You could easily walk into a store and question the manager about how a particular product is selling. Is it doing quite well? Are sales dropping off? Talk to your friends about the products and services they use (see "The Power Of Investing In What You Know," December 1992).

Ideally, you want to do as much research as you can. Read the company's annual reports and any information that is available from industry trade publications and such resources as Value Line Inc. and Standard & Poor's Corp.

Sometimes, your broker may not even know that much about a company. His or her recommendations are often based on reports from securities analysts specializing in that given industry.

When you invest in a mutual fund, you may not be able to choose the companies that actually go into the fund. But you can, however, find out information about those companies.

The major funds will typically have anywhere from 50 to 300 stocks in their portfolios, many of which you may be familiar with. Read the fund's prospectus. Talk to the fund's portfolio manager. Most funds have 800 phone numbers.

Some mutual funds may have newsletters. You could also rely on quarterly or annual reports. But by the time some mutual fund reports come out, the portfolio's makeup may be a few months behind what the company is actually investing.
COPYRIGHT 1993 Earl G. Graves Publishing Co., Inc.
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Title Annotation:includes related articles
Author:Brown, Carolyn M.
Publication:Black Enterprise
Date:Jan 1, 1993
Previous Article:Teaching our children.
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