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July 19, 2002 -

Learn Portfolio Management with Official NAIC Tools

ICLUBcentral now offers two levels of NAIC tools to enable investors to tweak and trim their portfolios.

- NEW! NAIC Classic PERT & PMG
This upgrade to NAIC Classic includes NAIC's most popular portfolio management tools, including the PMG Report, PMG Graphics, PERT-A, PERT-B, and the PERT Report. The NAIC Classic PERT & PMG Add-On is great for investors of all levels, with a step-by-step tutorial and help from the Stock Wizard for beginners, plus an experienced mode that lets more advanced users really let loose. 

For a limited time, the upgrade is just $29 to owners of NAIC Classic. Order toll-free at 1-877-ASK-NAIC (877-275-6242), ext 0, or online at the following address:  More information & demo copies available at

- Stock Analyst Plus
Not for beginners! NAIC's most powerful analytical software, Stock Analyst Plus is the best software for advanced stock and portfolio analysis, with unmatched balance sheet capabilities.

Order for $99 at 1-877-275-6242, ext 0, or online at  More information & demo copies available at  

Barb's Tips: Portfolio Management Steps

Portfolio management starts at the point you own an investment. It is the process of managing your investments to achieve specific objectives. Portfolio management encompasses several related topics:

    • Assessment of each investment to confirm its expected performance,

    • Assessment for tax accounting,

    • Assessment for diversity of holdings for industry or sector, size, market, etc.,

    • Assessment of portfolio risk, and

    • Assessment of potential income and return for the portfolio.

After a completed portfolio assessment, you are then able to make changes that achieve specific portfolio objectives. For NAIC-style investors, the first assessment item in the list is key to portfolio management. It requires updating an SSG and/or referring to the PMG and PERT reports for the most current company results. The second assessment requires a software program like the NAIC Club Accounting program or its online version. The final three assessments are the focus of this tip.


The Portfolios section in Stock Analyst PLUS! (SA+) helps you assess a portfolio to determine if it is meeting specific objectives. Objectives are mostly those that NAIC talks about and that you should be consciously following. For instance, is the basket of stocks that you hold capable of achieving an overall 15% total return? When you have set up your portfolio in SA+, this total return figure will be refreshed each time you update an individual company's SSG.

Use this same objective for the other items. This information is reported in the Portfolio Summary area at the bottom of the report. The holding period information indicates your trading (buy/sell) activity. For NAIC-style investing the average holding period should be 4-5 years or longer. For new portfolios this figure will be proportionally smaller.


Access Diversification from the "Divers" button in the Portfolios Report. Most often used are the choices of size (typically by revenues) and sector. The guidelines here depend on your objectives. Most NAIC members will likely hold a majority of large companies (50-70% of the portfolio). This is not such a bad thing as long as the other portfolio items (total return, upside/downside ratio) meet expectations.

For sector diversification a balance is more desirable. You may find that an established portfolio becomes skewed due to several large holdings — stocks that have done well for you. A large holding is not a bad thing as long as the stock is performing (growing sales and earnings) as you determined in the SSG.

You may wish to consider selling a large holding as the potential future return reduces. At an U/D of 0.5/1 (halfway in the hold range) you may consider using the Challenge Tree (challenging the company with another company with superior characteristics) to improve the overall potential of the portfolio. In all instances, if the company's conditions are changing adversely, a sell consideration may be appropriate regardless of other indicators.


Managing a portfolio with SA+ is simple. Updating individual stocks automatically updates the Portfolio Summary to report the overall status of your holdings. Your main concern is to set objectives for the portfolio as you do for individual stocks and make sure that your portfolio meets those objectives.

This week's segment of Barb's tips was written by Corry DalMaso.

Club Interview: Dragons in Ascent 

The Dragon Investment Club of Southern California has seen demonstrable growth this year. Not only has their portfolio been doing well, recovering from a 12% dip in 2000, but  three club members have also given birth. They hope to keep up the portfolio growth rate, but have little expectation for maintaining the birth rate. 

In 1999, Dr. Hau Vu founded the Dragon Investment Club of Southern California. The club's portfolio currently holds about one stock per each of the 27 members. The Dragon Club began as buy-and-hold investors, but jumped on the Internet bandwagon in 2000. They were burned after the Internet stock bubble and they blame this on having strayed from their basic investment guidelines. Luckily, they still had their initial, solid investments: Wal-mart, Wells Fargo, and Home Depot, for example. Over their club lifetime, they've beaten the S&P 500 by two or three percent. 

Since 2000, they've returned to their investing fundamentals. Dr. Vu's current advice is: "Have certain basic principles and stick by them, whatever the market does. Don't get enamored by what the market does. If a stock has a potential of doubling your money in 5 years, then keep it. Otherwise, sell." 

Following this wisdom, the Dragon Club purchased Apollo Group (APOL), an adult education company, because it had shown a positive cash flow and revenue growth for prior six to seven years. That investment has yielded 120% returns in under two years. Another recent winner for the Dragons has been Concord EFS Inc. (CEFT), an electronic money processing company. 

Before joining an investment club, Dr. Vu thought stock brokers were far more superior than any individual investor. Since then, he's learned that expert-quality investment information is available on the Internet for those willing to put in the time and do the research. Club president Thuy Nguyen makes sure that the club evaluates each holding at least annually using NAIC's Stock Selection Guide (SSG). The club stresses member education. According to Nguyen, the club's greatest asset lies in its active members. In her words, "If you are a passive person, you go with the flock. Kind of like sheep who don't have a strong enough personality to stand their own ground. So whoever has the strongest personality could determine how the club is investing. You need quite a number of strong members to object to [stock purchase] recommendations. If we didn't have strong character in the club, we would have lost a lot more money."

By Ann Schiff

$99 NCA 2 Offer Extended

Due to customer demand, NAIC and ICLUBcentral have extended the $99 NCA 2 upgrade offer until NAIC exhausts its stock, so you still have a chance to get one before the upgrade version disappears!

Users of NAIC Club Accounting 1.04 - get current with tax law by upgrading to NAIC Club Accounting for Windows version 2. To purchase, see or call NAIC at 1-877-275-6242, ext 0. 

New series: Thoughts and other comments from Joe Pulizzi, individual investor and investment club freelance writer. 

Club Notes: Patience Will Make You Money in this Market

I have a few friends at work that I consider my stock market buddies. Basically, when we see each other, we discuss the current status of the market. They were in such good moods around February of 2000. Their 401(k) accounts were booming. One of my friends, Bill, was even discussing early retirement because he was doing so well in the market.

I don't hear that from Bill anymore. 2001 and 2002 have been different years, different animals. Now, it takes every piece of advice I have to cheer him up. But there is one message that I firmly believe in, and now my friends believe as well - patience.

Here is a great example I like to use. There are two things I hate: traffic jams and lines at the grocery store. A few years ago, I used to weave in and out of traffic trying to get through the fastest. I would move back and forth - anything to make progress. I would do the same thing at the grocery store. I would keep jumping to what I thought was the "shortest" line. It took me a while, but I finally learned my lesson. After weaving in and out of lanes, I would notice that the same cars surrounded me. Those cars had stayed in their lanes while I was maneuvering around. Sometimes, I even lost ground. The grocery store was worse. Once I changed aisles, I would notice how fast the aisle I was in was moving. It seemed to happen every time.

For a long-term investor, the stock market works the same way. I know a few people who are buying and selling like crazy in their 401(k) accounts. I also know a few clubs who are doing the same, trying to get ahead of the market. They are now learning what I have learned in traffic and at the grocery store. Patience almost always wins out. In my recent discussions with them, my friends who have been buying and selling in their 401(k)s are much worse off now than they would have been had they just added to their current accounts. The investment club I talked to regarding buying and selling had an even worse story. They had a couple of stocks they thought were going to move lower in price. They loved the companies, but were afraid of what the market might do. So, they sold those growth companies and bought "more defensive" stocks until the bear market was over. They would buy the growth stocks back at a much lower price later. What did they find? The two stocks they sold have since added about 50%, while the "so-called" defensive stocks have lost about 50%. Had they been more patient, they would be vastly better off.

You as an individual investor or investment club can learn a lot from these people. For a long-term investor, this could be a glorious time. It won't be easy, but if you are patient, do your homework, and add to your current investments, you will see the payoff in a few years. Don't concentrate on what the market is doing today - look at where the market will be five years from now. You will be amazed at what bargains you made because you didn't weave in and out of traffic. 

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