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DURING THE BULL RUN of the 1990s, when the S&P 500 soared 417%, I had a brilliant idea: Why not start an investment club? I invited my father and sister to participate. My mother declined. It turned out she was the smart one in the family. We met periodically, usually on a Sunday, to decide which companies to invest in.
I was serious about this endeavor and determined to make it successful. I even gave our new investment club a name: DSD. It was the starting initial of our first names, Diane, Sam and Dennis. We opened a brokerage account at TD Waterhouse to execute our trades. I was so excited. Why not? It seemed like everyone was forming investment clubs. The famous Beardstown Women’s Investment Club book was published during this time. If a group of septuagenarian amateurs could be successful, or so they claimed, why couldn’t we?
It didn’t take long to realize this was going to be more difficult than I thought. Our biggest problem was a lack of good investment ideas. Most of them came from an investment newsletter, newspapers, word of mouth, and talking heads on television and radio. No, we didn’t buy Amazon. We bought AMC and Marriott. No, we didn’t buy tech behemoths Microsoft or Intel. We bought Ultratech Stepper instead.
After a while, we realized this was a bad idea and we disbanded. I believe we made a few dollars. Of course, we badly underperformed the market. In the end, I realized we would have been far better off just investing in an S&P 500-index fund.
In fact, I probably learned more from my mother about money than from that ill-conceived investment club. After my father passed away, she asked me to go with her to Wells Fargo, where she had a safe-deposit box. She thought it would be a good idea for me to have access to it, should something happen to her.
As we went through my mother’s safe-deposit box, she pulled out a little cloth bag containing some of her most cherished jewelry. Most of the items were rings she bought over the years. She also had a number of coins that she’d collected. None had real value, but she held onto them for other reasons. What really caught my attention was the wad of bills that was shoved in the back of the safe-deposit box.
I asked my mother how much money was there. She said she didn’t know. I counted almost $18,000. I asked her, “Where did all this money come from?” She said it was from the money that my sister and I gave her for Christmas and birthday gifts, so she would have more spending money in retirement. Also, my father would give her the monthly dividend check from a bond fund they owned. This was usually only about $50.
I was astonished by my mother’s financial discipline and persistence. When I look back, I wonder why my mother chose to keep her money in a safe-deposit box. Why not a bank account, where she could have earned a little interest on all that money?
I think my mother wanted her own money that was separate from my parents’ joint accounts. She wanted some financial independence, so she could spend money on her own terms.
When she retired, her paycheck went away and some of her financial independence went away, too. This was her way to recapture what she had lost. Of course, she had her Social Security check, but that was automatically deposited in my parents’ joint checking account.
In her thinking, my mother was no different from my wife and me. We both have our own money, including separate checking accounts and credit cards. But we also find a way to share expenses, including paying for things out of a joint checking account.
What we like about this arrangement is that we have the financial independence to buy the things we each enjoy the most. But at the same, we can still work together as a team, paying for expenses and paying off any debt we might have accumulated.
What about teaming up to pick stocks? Something tells me that wouldn’t be a good idea.
Dennis Friedman retired from Boeing Satellite Systems after a 30-year career in manufacturing. Born in Ohio, Dennis is a California transplant with a bachelor’s degree in history and an MBA. A self-described “humble investor,” he likes reading historical novels and about personal finance. His previous articles include Live It Up, Don’t Delay and Try Not to Slip. Follow Dennis on Twitter @DMFrie.
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While teaming up to buy individual stocks is a bad idea, I do think couples should team up on their investment portfolios.
Funny thing about the Beardstown group- they were praised for beating the S & P 500. Their results were subsquently audited and they had been calculating results incorrectly-they underperformed the index.