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Fear

When I was at the BetterInvesting National convention last week, I talked to many clubs about the Quest for Positive Relative Returns.  There was a lot of interest and many more groups signed up to participate.  Several people made the comment that they were a little bit nervous to find out how they were doing.  I think that is an interesting thought and not necessarily that uncommon. 

It’s not easy to select investments.   You might not be beating the market.   But,  as I told one club when they saw their results,  the first step on making improvements is knowing where you stand.    Being in an investment club is an educational opportunity.    You can’t learn to invest if you don’t actually make investments.   Developing the skill to overcome the psychology involved with placing  your money in something with any amount of risk is an important part of the learning process. 

There is a big difference between talking about making investments and actually doing it.   One of the main values of being in a club is that you can learn with a smaller exposure to the risk of making mistakes because you are pooling small amounts of money with others.   If your clubs relative returns are negative,  look at them not as an indication of failure, but as a measurement that will help you to focus on what is important.   When you’re managing a portfolio, you need boundaries within which to make decisions.  If you’re not beating the stock market,  you probably need to look at the parameters you’re using to set your boundaries.  That is why we do what we do.  To learn how to pick those parameters.

It can be done.  There are clubs that are consistently beating the market.  It’s a fun and interesting process to learn how to do what they are doing.  Let go of the fear that you might do something wrong and enjoy the challenge of learning to do it right.

Laurie Frederiksen

www.bivio.com