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May 10, 2002 -

NCA 2: Why your club should have it

There's some good news and some bad news. The bad news is that versions 1.04 and earlier of NAIC Club Accounting are no longer in compliance with federal tax law. The good news is that you can fix this easily by moving up to NCA 2, and you'll be really, really glad you upgraded, because version 2 of NAIC Club Accounting makes the treasurer's job much easier. (And you can get some good deals if you act soon--see below.)

Changes in tax law
To encourage longer-term holdings of securities, Congress has enacted modifications in tax law, including a new capital gains category for securities held longer than five years. NCA 2 handles this tax category, whereas versions 1.04 and earlier do not. As tax law continues to change, we will update NCA 2 to remain in conformity with it. Versions 1.04 and earlier, on the other hand, will fall progressively further out of compliance with tax law as time passes.

Stock price download
You no longer need to manually enter security prices every time you want to value the club portfolio. With an Internet connection and a single click, you can now update the entire club portfolio with prices from all major US markets.

Chart your club, stock, and member performance automatically on useful and dynamic graphs. These are especially good to hand around at club meetings for analysis of long-term club performance.

And lots more...
Looking to edit transactions without having to delete and reenter them? Want more cash accounts and the ability to add, delete, and rename them? Does your club give cash to charity? What about appreciated stock? NCA 2 handles all of this. During a member withdrawal, is the payout date different from the valuation date? NCA 2 can handle this as well. Want to split expenses equally among all members for purchases like NAIC membership? That's not how NCA 1.04 handled expenses, but NCA 2 gives you this as an option.

There are also a lot of little niceties built into NCA 2 to help make the treasurer's job just that much easier. One day, you'll be trying to enter a spin-off transaction, and you'll realize that it's just so much simpler than in the past, for example. Or maybe you'll be handing over the treasurer task to the new treasurer, and it won't be as hard for them to learn the accounting tasks as it was for you. So while the IRS may not make life any easier, we hope this may help.

Upgrade discount expires June 30

So get current with tax law by upgrading to NAIC Club Accounting for Windows version 2. The discount upgrade price of $99 expires June 30, 2002, so buy your upgrade before then! For more details or to purchase, see or call NAIC at 1-877-275-6242, ext 0.

Your club can upgrade to NCA 2 for free by opening a TD Waterhouse club account. For more information, please visit:

by Matthew N. Stoller

New series: Product tips by Barbara DalMaso, co-founder of STB Investor Software

Barb's Tips: NAIC Classic PMG and PERT Add-on

As announced last month, NAIC Classic now offers portfolio management reports to help you make decisions about investing in stocks.

The core program, NAIC Classic, includes the Stock Check List, Stock Selection Guide (SSG), SSG Report, and Stock Comparison Guide.

The PMG and PERT add-on to NAIC Classic augments the software with the following reports: PERT A, PERT B, PERT Report, PERT Graphics. (A completed SSG is a prerequisite to working with, understanding, and benefiting from these additional reports.)

The purpose of the PMG (Portfolio Management Guide) and PERT (Portfolio Evaluation Review Technique) is to track the on-going achievements of a company to compare with estimated figures from the SSG. This includes recording and monitoring stock price and P/E (price-earnings ratio) on a monthly basis, as well as sales, EPS, and pre-tax income on sales every quarter (3 months).

In the SSG, you set company objectives for:

  • Growth (in Part 1 of the SSG by setting trends and projections for sales and EPS),
  • Quality (calculated in Part 2A of the SSG as pre-tax income on sales),
  • Value (calculated in Part 3 of the SSG as historical average P/E), and
  • Risk (calculated in Parts 4 and 5 of the SSG as upside/downside ratio, price zoning, and total return, plus in the SSG Graph-Capitalization box as debt to capital).
  • NAIC advocates the use of PMG and PERT reports to measure how actual results vary from your expectations. Significant differences between estimates and actual numbers is a cause for concern and demands investigation. This monitoring of company progress should be part of your regular portfolio management process for stocks you or your club hold.

    PMG and PERT reports flag potential buy and sell possibilities. It is important to stress that a buy or sell decision should only be made after consulting an updated and properly completed Stock Selection Guide.

    For more information about the PERT & PMG add-on to NAIC Classic, please see

    Graduate to Stock Analyst PLUS! and screen for free

    Time is running out on this special deal: step up to Stock Analyst PLUS, the most powerful NAIC tool for performing detailed studies of companies, and we'll throw in our popular Prospector II stock screening software (a $95 value) for free!* Approved by NAIC for performing SSG analysis, Stock Analyst PLUS is the best software for advanced stock and portfolio analysis, with unmatched balance sheet capabilities.

    Users of NAIC's S&P Compustat datafiles can use Prospector II to easily identify companies with particular characteristics. Free upgrade to an OPS-compatible version for Prospector II users who take advantage of this offer is coming soon!

    To order Stock Analyst PLUS for $99 and receive Prospector II for free, just call NAIC toll-free at 1-877-275-6242, ext 0, or check out

    * Offer valid only on purchases made between April 10, 2002, and May 31, 2002. Customers must register SA+ to receive free Prospector II software. Prospector II manual available by .pdf download.

    Investment Club Therapist: Can My Club Split Its Units?

    Dear Doug:

    We started our club with each unit valued at $25. Now that same $25 won't buy even half a unit. Is there a way to "split" the unit value so it will again be approximately $25, to entice new members to join? I tried going to the Utilities section and changing the starting unit price, but that didn't work.

    - Shirley L.


    Dear Shirley:

    Occasionally, the Investment Club Therapist finds that the best solution for a particular problem is to engage in a little modification of thought, to avoid treating problems where none exist. The issue of splitting your club's units falls squarely within this diagnosis.

    Publicly traded corporations sometimes split the price of their shares. These companies authorize splits in order to keep share prices within a certain price range, which they claim keeps certain kinds of investors interested in their stocks. However, many naive investors get over-excited about stock splits, forgetting that two shares of a ten-dollar stock is worth the same thing as one share of a twenty-dollar stock. It's no different than having two ten dollar bills or one twenty in your wallet--you have twenty bucks either way. That's why Warren Buffett has famously scorned stock splits. His Berkshire Hathaway stock currently trades around $75,000 a share.

    Mutual funds seldom split their shares. Since the 1960s, there have been only about 300 fund splits. Funds such as the Vanguard Health Care Fund and the Fidelity Financial Services Fund have share prices above $100.

    When it comes to clubs, the Mutual Investment Club of Detroit, one of the longest-running clubs in the U.S., has never split its units in its 60-year history. Its original unit value was $10, back in 1940, and the club's unit value today is $1,428. Still, their minimum monthly contribution is $20, which doesn't buy anything close to a single unit! New members may need a year or longer before they reach the one share milestone.

    While splitting your club's units would make the price of a unit close to your original share value of $25, the fact still remains that the starting value of your club's units was determined on a purely arbitrary basis. There's no particular reason that a club should set its starting unit value at $10 or $25--or even $2,754.63 if they wanted. $10 is a nice round number, and that's about its only advantage.

    I'm sure you can see where this is all leading. NAIC Club Accounting software doesn't offer a way to "split" units, because a unit split doesn't accomplish really anything. Splitting your club's units would make it easier for new members to buy a unit, but it won't change their percentage ownership in the club one iota. Each member's percentage ownership is clearly stated on the Members Status Report you prepare for the club each month. If you're concerned that your club's success has made your unit value rise, then the Investment Club Therapist suggests that you spend some time educating your club's members and potential members that a unit is simply a structure for organizing the division of the club's ownership. It doesn't matter if you own .0076 shares or 356.8792 shares in the club; what's important is how each member's value in the club grows (hopefully) over time. If the time comes when your club's unit value stops growing for an extended period in an otherwise rising market, that's the time you should really start worrying about your club's condition.

    - Doug

    Doug Gerlach, author of several popular investing books and websites, serves in his spare time as Secretary of NAIC's Computer Group Advisory Board. To ask Doug an investing question yourself, just write to!

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