BI > MARCH 2001

Future Moneymakers

As longtime investors know, the most difficult part of investing is getting started. But once a club has been formed and the first stock purchased, how do you stay motivated to keep it up? And what challenges are unique to youth clubs? A few answers may be found by examining club procedures of the "Future Moneymakers Youth Investment Club" of Prince Georges County in Maryland.

Formed in 1998 after its founders received encouragement from their parents, the Future Moneymakers club, according to its president, 14-year-old Marcus Shorter, believes that a "friendly atmosphere" must exist between club members to ensure successful investing. The club works to create that atmosphere, Shorter says, by keeping the meetings "on a level that everyone can relate to."

"We work at creating a social atmosphere, yet we know the club is all about business," Shorter says. "We're all friends and our goal is to gain experience in investing -- and to make some money."

The group formed two years ago after reading about an NAIC investment initiative in The Washington Post. As can be expected with youngsters, some of the members were skeptical at first, but it wasn't long before they found the concept to be interesting. Before buying their first stock, the group took a whole year to learn about investing.

The Future Moneymakers work at creating a positive social atmosphere, but as club President Marcus Shorter (far left) says, "The club is all about business." Also pictured, from left, are Gregory Hagar, sponsors Rosalyn Wilcots and Verna Frazier, and Jared Wilcots.

Shorter says it's his job to make sure that the investment club meetings are run properly and that rules are followed. He, along with other officers, sets the agenda, keeps order, takes votes and regulates the process.

"It's not that difficult," says Shorter, who wants to earn money through his investments so that he won't have to rely on his parents for money. "Everybody has assignments, and everyone knows what they're supposed to do." "I like being a leader," Shorter says. As the leader of the investment club, he says he likes the idea of "steering the ship."

Although Shorter and the other members of the Future Moneymakers may not realize it, they are leaders in more ways than one. They represent a new group of investors and future members of NAIC, which will increasingly be young, tech-savvy and minority. While the current youth membership of NAIC is about 3,000, there are many more young investors, says Jeff Fox, NAIC director of youth programs. Fox says that many youth members go uncounted because they are part of family investment clubs, which is a large member category.

"Youth clubs are certainly a growing movement," Fox says. The NAIC initiative to increase the number of youth clubs was spawned by current adult members who regret the fact that they didn't get started earlier. "By focusing on the youth market now," Fox says, "we are addressing a problem stated by our current members, who typically started investing in their 40s."

As in the case of the Future Moneymakers, Fox says adult leadership is extremely important to establish a successful youth club. A high turnover rate and a lack of interest could result without such supervision, he says. "Kids are into a lot of activities, so it is important that youth investment clubs are set up initially for educational purposes," he says. "Once they are into a club, they learn quickly that it's about more than just investing, but also includes critical thinking and public speaking. It takes a lot of guts for a kid to do this, but if they can manage it, those abilities will be with them for the rest of their lives."

Fox says that while the average age of youth investors is around 16 or 17, NAIC is pushing to acquaint a lower age group -- those similar to members of the Future Moneymakers Club. "We want them to know that no matter what career path they choose, they will always be investing -- whether it's their time, their energy or their money."

Lively discussion is one of many things youth clubs have in common with their older counterparts.

Given current business trends, it's a safe bet that career choices of many young people will include some aspect of technology, which can be used toward their investment pursuits. Online investing, as most NAIC members know, is one of the fastest growing areas for investors and will certainly be utilized fully by today's tech-savvy youth population.

Brittany Jones, a 12-year-old member of the club, illustrates the point. Brittany, a seventh grader at Drew-Freeman Middle School and a member of the school's basketball team, is considering a career in computer science.

Brittany, along with her twin sister, Bridgett, the vice president of the club, enjoys the concept of investing money now with expectations of bigger returns in the future. "It's a fun experience and it helps us to better understand the value of money," she says. "We're learning that if you invest now, you can earn a great deal of money when you get older." Bridgett said she was especially thrilled to see how technology was being used during the club's visit to the New York Stock Exchange.

Like all club members, the sisters invest $10 each on a monthly basis. They serve as experts for the group on investment club bylaws, and they love to give advice to fellow members on possible investments. Bridgett, who wants to pursue a career in medicine, and Brittany, who, in addition to studying the computer field, aspires to play in the WNBA, say they plan to continue with the investment club until they go to college. Both say they will focus their attention on their individual portfolios during college.

The investment club's second set of twins, Courtney and Ronnie Gilmer, are also hyped on investing. These 13-year-olds were reluctant to get involved at first, but are now hooked. "Before, I thought money was no object," says Courtney, who was the club's first president. "But being in an investment club has changed that. I've learned to invest my money now and to use it wisely." Her brother, Ronnie, says he enjoys tracking a stock before making a recommendation to the club to buy. Among the stocks he has tracked are Intel, Cisco and Microsoft. "It's my hope that the stock will 'blow up,'" Ronnie says, using youth slang for phenomenal growth. "Who knows, one day I could be a millionaire." In addition to the holdings mentioned above, the Future Moneymakers hold Nokia, UPS and Federal Express; their portfolio was valued at nearly $4,000 in December 2000.

Though Marcus Shorter (right) enjoys "steering the ship," the work of able "crew" Tori Haylock (left) and Jared Wilcots, along with other club members, is a key part of the Future Moneymakers successful operation.

In addition to their fondness for investing, Courtney and Ronnie say they enjoy speaking publicly about their investment activities just as much. The investment club has presented its portfolio to a number of interested parties, including NAIC members attending the Annual Congress in Philadelphia.

"They were simply amazing," says Ken Janke, NAIC president and chief executive officer. "Not only do they know and understand the concept of long-term investing, it's obvious that they enjoy doing it. They are a great bunch of kids and great ambassadors for NAIC investment principles. We're sure that their story will resonate with investors and noninvestors alike."

That could surely be the case given the growing interest in investing among the general public, as well as African-Americans and other minorities. National surveys over the past few years have noted the disparity between minorities and the general population when it comes to investing in the stock market. The good news, however, is that the gap is closing, albeit slowly.

Upper-income African-Americans, the reports say, are increasing their investments in the stock market, but those in the middle and lower income categories have yet to take the step. Lack of education on investment principles is often cited as the major deterrent to investing in the stock market. Fortunately, efforts are underway by a number of groups and organizations -- including NAIC -- to address this disparity and to develop programs to ensure that every American has information necessary to make wise investment decisions.

"Exposing young people to the principles of investing early is one sure way to create a nation of investors," says Sandra Gilmer of the club's steering committee. "We should do our best to make it fun and help them recognize that it will benefit them for a lifetime."

Tips for Youth Clubs from the Future Moneymakers

Because members of the Future Moneymakers Youth Investment Club range in age from 8 to 16, keeping their attention and interests during meetings can be a challenge, says Sandra Gilmer, a parent and member of the club's steering committee. To address that challenge, as well as others, the club recommends the following procedures, which can be just as useful for adult clubs:

• Keep meeting times reasonable. To increase comprehension, meetings are held for about 1 1/2 hours, down from an initial 3 hours. Even though meeting times may be a particular concern for youth clubs, it also could apply to adult clubs, depending on the investment knowledge of individual members.
• Make investment learning fun and competitive. Incorporate games on investing or develop competitions to help keep club members focused. "They really enjoy that approach," Gilmer says.
• Include social time. For each investment club meeting, the host family always provides dinner, which allows members not only to break bread together -- but to "make bread" together as well. The young people enjoy the time together and look forward to regularly scheduled meetings.
• Incorporate field trips. To make investing interesting, take club members to locations that highlight financial issues or encourage long-term investing. The Future Moneymakers Club, for instance, has visited the New York Stock Exchange, the Federal Reserve Board and the NAIC Congress. "They really, really enjoy field trips," Gilmer says.
• Share successes with others. Because of the growing interest in investing, seek opportunities to spread the word about the success of your investment club with others. Following feature stories on the Future Moneymakers Club in Better Investing and Young Money Matters, the club received numerous invitations to speak on their investment program. Speaking before groups and giving PowerPoint presentations on their portfolio, members say, is just as exciting as investing.
• Ensure the commitment of parents/spouses. For youth clubs, it's imperative that parents make a commitment to ensure their children attend meetings and make required contributions. The parents, who serve as a steering committee for the club, also signed a partnership agreement and play a crucial role in the success of the club. Parents plan the educational curriculum, maintain the E*Trade account, and help plan field trips, as well as handle other duties. "Needless to say, this is a lot of work," Gilmer says. For adults, securing the commitment of a spouse or significant other can be just as important.
• Allow youth to make decisions and run meetings. Again, for youth clubs this is important. While the parents' steering committee provides input for the agenda and provides guidance on purchasing decisions, the kids run the meeting and make final decisions. When the club's decision goes against the steering committee's guidance, it's chalked up as a learning experience.

These are just a few of the procedures used by the Future Moneymakers Youth Investment Club to ensure that they stay on course to reach their investment goals.