April 14, 1998
Six
Opinions
The Fool on the Beardstown
Ladies
Cheers to the
Ladies
by Yi-Hsin Chang
([email protected])
In all the hullabaloo over the Beardstown Ladies "lying" about the returns on their investments, critics -- all too eager to attack the heretofore lovable and huggable grannies -- fail to recognize the women's biggest accomplishment. No, it wasn't their much-touted 23.4% annual return that has turned out to be just slightly inflated. Nor is it their best-selling investment books or popular appearances on national TV. Their most important achievement is that these "ordinary" ladies from a small town (population 6,000) an hour's drive from Springfield, Ill., have inspired countless "average" Americans to start investing, either on their own or as a member of an investment club member or both.
From the beginning, the Beardstown Ladies, formally the Beardstown Business and Professional Women's Club, stressed that they were "ordinary people" aged 41 to 87, most of whom had lived all their lives in small town, U.S.A. They candidly admitted that when they started the club in 1983, most members, like most Americans, knew very little about investing. The ladies just shared a desire to learn how to better manage their personal finances.
In the foreword to the paperback edition of their first book, The Beardstown Ladies' Common-Sense Investment Guide, they write, "It seems like every other person we reach with our book wants to join our club." Because the ladies weren't accepting any new members, especially not anyone living far from Beardstown, they recommended that people get together with friends and neighbors as the ladies did and start their own clubs. Two months after the book hit the shelves, almost 700 new clubs had registered with the National Association of Investors Corp. -- an NAIC record.
Some clubs felt so inspired that they incorporated the ladies into their names. For example, a group of professors called themselves "The Sons of the Beardstown Ladies." There are now more than 34,000 investment clubs, compared with less than 13,000 in 1994 when the ladies' first book came out. Though the Beardstown Ladies can't take all the credit for the rise, it's unquestionable they helped change the landscape of investing across the country.
The first part of the Common-Sense Investment Guide, in fact, deals strictly with how to start an investment club, from drafting an operating agreement to electing officers to hiring a broker. The ladies share the three goals of their club: education, enjoyment, and financial enrichment, in that order. They explain that enjoyment is critical to a successful club: "While it is always fun to make money, you've got to keep interest and spirits high when the market lags." In the section "Investing the Beardstown Ladies' Way," the ladies suggest strategies such as paying yourself first and reinvesting your dividends. These are hardly shady or hokey tactics, but rather commonsensical advice that can be found in many an investment guide.
More than 30 pages of the ladies' first investment guide are devoted to profiles of the women and their favorite recipes, which include Shirley's Stock Market Muffins (Guaranteed to rise!), Hazel's Quick-Return Meal (basically a pre-made frozen dinner), Elsie's Prize-Winning Angel Food Cake, and Margaret's Even-Bush-Would-Like-It Broccoli Casserole. In The Beardstown Ladies' Stitch-in-Time Guide to Growing your Nest Egg, the grannies share what they do in retirement and or leisure, such as fishing, quilting, painting, and breeding and training horses.
Simply put, the Beardstown Ladies are real people who could easily pass for your mother or grandmother or wife, who simply made an honest accounting mistake. It's not so important how much they made each year, how much their portfolio has grown, or how sophisticated their stock-picking strategies are. The important thing is that these "ordinary" women were able to deliver a message to average Americans that anyone can learn what they learned and do well investing in the stock market.
Their message certainly wasn't new. Many Wall Street gooroos, including legendary mutual fund manager Peter Lynch, have preached the same message. The difference, of course, is that the Beardstown Ladies struck a chord with many Americans. They became famous and ever so popular precisely because they weren't professional "experts" -- they were the ladies next door. One member, Maxine Thomas, has received 37 marriage proposals while doing book tours around the country. It's not hard to see why. The charming 77-year-old recently told a group in Oak Park, Ill., "From birth to 18, you need good parents. From 18 to 30, you need good looks, and from 30 to 50 a good personality. But after 50, you'd better have some good investments."
It's important to note that thanks to improving performance since 1993, the Beardstown Ladies' annual return since its inception has reached 15.3%, according to the Price Waterhouse audit that determined the club's annual return between 1984 and 1993 was actually 9.1%, not 23.4% as originally claimed. The Standard & Poor's 500 has climbed an average 17.2% per year since the club was founded. Some curmudgeons may say that the ladies -- and other investors -- simply should have parked their money in an index fund. But the important thing here is that these women invested at all, that they did it on their own and still came out ahead while learning about investing and making good friends -- and, of course, sharing recipes -- all along the way.