At the annual Clinton family reunion in South Carolina, there’s plenty of food, fellowship, and fun. There’s also a lot of finance, money management, and investment education going on. “We come together to share knowledge,” says Jerraune Jenkins, 44, president of Family Tree Investment Club. “There’s nothing really complex about what we discuss; we just try to get the information out there for everyone.”
Organized in 1994 by 25 family members who ranged in age from 17 to 82, Family Tree’s mission was to help those in the family who had a limited understanding of the stock market. They decided to pool their financial resources and learn more about investing. Each member makes a minimum initial investment of $50 and pays $25 in monthly dues. Following the principles of the
National Association of Investors Corp., Family Tree’s investment strategy was to invest in established, blue-chip companies as well as up-and-coming companies projected to perform well. “Going in, I expected the investment strategies of the older members to be different,” says Jenkins, a budget director for the University of Medicine and Dentistry of New Jersey, New Jersey Medical School. “It was surprising that a lot of [them] understood and agreed with the club’s long-term investment strategies.”Family-run investment clubs are good opportunities for relatives to come together and learn about investing and financial matters, says James Johnson, a board member of the National Investors Association, an advisory board to the NAIC. Johnson says the close, eternal bond of the members generally increases a club’s longevity. But he also says the fact that
members may be close or comfortable with one another shouldn’t keep the club from operating as a business. “It’s a business just like any other, and it should be formal like any other organization,” says Johnson, a member of Ujamaa Holdings, a 7-year-old family investment club based in Oklahoma City. “There ought to be a formalized structure to the organization, and education should be paramount.”The members of Family Tree have gotten a solid financial education while handling the business of the club. In the early years, the club’s portfolio realized gains of about 10% to 20% per year investing in companies with great track records such as PepsiCo (NYSE: PEP), Staples (Nasdaq: SPLS), and Toys “R” Us (NYSE: TOY). Then the portfolio suffered major losses during the market downturn in
2000. Over the last few years, the club’s portfolio has kept pace with inflation, earning about 2% to 3% annually. In the 10 years since the club began, Jenkins estimates that its portfolio has gained less than 1%.When the market was in its worse decline, club members deposited their monthly dues into money market accounts to be safe. The club has also lost seven members — three have passed away and four have relocated or left the club for financial reasons. These departures shrank the club’s portfolio and diminished the ability of its members to purchase additional stock. “We’ve been through tough times, but people have stuck it out,” says Jenkins.
The club’s portfolio balance of $39,000 is made up of roughly 25% cash, 5% mutual funds, and 70% stocks
such as Comcast Corp. (Nasdaq: CMCSK), Verizon Communications (NYSE: VZ), Dell Inc. (Nasdaq: DELL), and The Walt Disney Co. (NYSE: DIS). Jenkins says Family Tree is positioned to become more aggressive with its future investments. Its strategy now is to target companies with a good history that have temporarily fallen out of favor, such as Merck.By the end of 2005, the club hopes its portfolio will have realized a 10% gain. For club members, the goals are more than financial. “We have to maintain and persevere [so we can] pass down our knowledge and the club management to younger family members,” says Jenkins, who is married and has three children. “We have to make sure that what we talk about, we do.”
FAMILY TREE INVESTMENT CLUB’S TOP HOLDINGS
| Comcast Corp (Nasdaq: CMCSK) | 25% |
| Verizon Communications (NYSE: VZ) | 14% |
| Dell Inc. (Nasdaq: Dell) | 11% |
| The Walt Disney Co. (NYSE: DIS) | 6% |