In This Issue:
1 Person, 1 Vote? Not in Investment Clubs
By Doug Gerlach, President, ICLUBcentral Inc.
In 2008’s Swing Vote, Kevin Costner played a mild-mannered New Mexican slacker dad upon whose shoulders an entire presidential election came to rest. As the 2012 election cycle plays out, we’ll be hearing plenty of sound bites about the power of each citizen’s vote.
Although your vote may not tip the entire presidential election, you could certainly have an impact on votes conducted within your investment club. And while your club may never deal with the complexities rivaling those of the Electoral College system or a state of Florida recount, there can be times when voting is more complicated than a simple yay/nay voice vote.
First, all investment clubs should support voting by the capital account of the partners. This allows the members who own the greatest amount of the club — and, presumably, the members who’ve been partners the longest and are the most experienced — to have a greater say in club business.
The alternative — one person, one vote — simply isn’t fair for members who have the most at stake in the club.
After all, public companies don’t operate on the “one shareholder, one vote” principle. They provide one vote per common share. If you want more say in the company’s operations, pony up the bucks to buy more of its shares.
As this method can be a bit unwieldy in practice, I recommend that clubs adopt a provision to allow for one vote per member by default on routine business, but to allow for a vote by capital account if called by any member prior to the tabulation of ballots. This protects the largest owners of the club while making it easy for the secretary to determine with ease whether a motion passes or not. …
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The 4th Rule of Successful Mutual Fund Investing
Take advantage of tax-advantaged accounts whenever possible.
Retirement plans such as Individual Retirement Accounts (IRAs), Roth IRAs, 401(k)s, and 403(b)s are a gift to investors. They provide incredible tax advantages, either by allowing your funds to grow tax-deferred (allowing you to delay paying taxes for several decades in many cases) and/or by providing a tax deduction with each contribution. Many companies provide employees with a matching component in their 401(k) plans, which lets your nest egg grow even more quickly.
In contrast, if you neglect the opportunity to invest in a tax-advantaged plan and solely invest in taxable accounts, current-year taxes will slow the overall growth of your assets. (You should probably still make a point of investing in taxable accounts, since you may be penalized if you withdraw money early from a retirement plan.)
These retirement plans are often great vehicles for mutual funds, and often funds are the only kinds of investments you will be allowed to make in them. You should aim to “max out” all available tax-advantaged investment opportunities to the fullest extent possible.
Download a free sample issue of the Mutual Fund Informer and, for a limited time, subscribe at a special Charter Subscription Rate!
In the next Insider, we'll review rule No. 5: " Intelligently diversify your funds and allocate your assets."
The Secrets of SmallCap Stock Investing
According to BetterInvesting principles, a significant amount of a stock portfolio should be invested in smaller companies. However, finding and analyzing these stocks is often more complex than for larger companies. ICLUBcentral’s new SmallCap Informer newsletter offers up tips, insights, and investing ideas for small company stocks to help enhance your or your investment club’s portfolio.
At next week’s Retail Investor Conference, SmallCap Informer editor-in-Chief Doug Gerlach will review his 5 rules of small-cap stock investing, as well as pitfalls to avoid in pinpointing small company stock opportunities. In addition, Doug will review several intriguing small company stock ideas of interest to long-term investors.
Register today so you don’t miss this valuable educational event!
It's Déjà Vu All Over Again
Déjà vu is the phrase that best describes the U.S. stock market around this time of year.
In early 2010, optimism was fueled by a 5.7% advance in fourth quarter 2009 GDP. The employment markets were still very weak, but stabilizing. Consumer spending and retail sales were advancing. All of these indicators pointed to a rebounding economy. In response, the market returned 7.0% from January through April of 2010. However, in May the market lost 8%, reacting to the beginnings of the European debt crisis, when Greece took a $145 billion bailout package and investors fretted over debt problems of the PIIGS (Portugal, Italy, Ireland, Greece, and Spain).
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July 27, 2012
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Events Calendar:
First Tuesday of each Month: Toolkit 6 User Group led by Doug Gerlach, ICLUBcentral Inc.
Third Tuesday of each Month: New Investment Club Orientation led by Doug Gerlach, ICLUBcentral Inc.
Doug Gerlach will also be speaking at the following events:
Aug. 2, 2012: Retail Investors Conferences; Doug Gerlach, Speaker
Aug. 7, 2012: Toolkit 6 User Group Webinar; Margins of Safety: Analyzing Profitability in Toolkit 6
Doug Gerlach, Speaker
Aug. 21, 2012: Investment Club Operations Webinar; Superior Stock Selection for Investment Clubs
Doug Gerlach, Speaker
Sept. 4, 2012: Toolkit 6 User Group Webinar; Studying Small Companies in Toolkit 6
Doug Gerlach, Speaker
Sept. 13, 2012: Retail Investors Conferences; Doug Gerlach, Speaker
Sept. 18, 2012: Investment Club Operations Webinar; Managing Your Investment Club's Portfolio
Doug Gerlach, Speaker
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