I am a member of a retiree stock club that has been investing in individual stocks for many years. The club meets every two weeks to analyze historic market data and to discuss investment ideas. The club exchanges ideas only, and each member is free to invest their own money as they see fit.
For a little friendly competition, each member selects 10 stocks at the beginning of each year to see who's picks produce the largest total return for the year. The club tracks how each member has done with their model picks through both up and down markets and calculates how a hypothetical $100,000 portfolio has grown over the years. The club continues to evolve in that we continue to evaluate new methodologies to identify which investments are buy candidates and which ones are sell candidates. Although I am a relatively new member of this club, I have already learned the following lessons:
1) It pays to buy quality companies that pay dividends. One member of the club has stated the requirement for a dividend in this way:"every company must pay the rent."
2) Diversity is important. Diversity allows your portfolio to still win even if some of the positions within your portfolio happen to lose.
3) You do not have to take big risks to make big returns. The most outstanding member of the club has made an average return of 20% over the past sixteen years with utility investments. He has grown his hypothetical $100,000 model portfolio to over $1.4 Million.
4) Individual members can beat the market or sector with good stock picks, but as a whole, the club does not beat the market on a consistent basis. Most of the club members would be better served just picking an index or ETF, as opposed to investing in individual stocks.
5) Club members, for the most part, are not interested in options. Perhaps this is the same reason why SA has dropped the options category.
6) The most productive club meetings are when we have differences of opinion. No one in the club is offended by constructive criticism.
7) No one in the club has a clue where the market is going to go in the next year. When it comes to the market, forecasting appears to be a waste of time.
8) Getting old presents a whole set of problems that have nothing to do with making good investments or doing well in the market. No one is immune.
Besides enjoying the great company, this club has made me a much more thoughtful and successful investor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.