Talking to Betty Sinnock is a little like talking to your grandmother — provided your grandmother is an accomplished trust officer at a local bank and part of one of the most successful, prolific, and high-profile investment clubs around.
Seventeen years ago, Sinnock helped form an investment research club that was open to everyone in her home town of Beardstown, Illinois. After three years, she went to thirteen of the members she felt closest to, both personally and in terms of their investment philosophy. The fourteen formed what is now known popularly as the Beardstown Ladies investment club.
In the past years, these women, who range in age from 45 to 90, have achieved an annual rate of return of at least 24 percent on their investments, far outstripping some of the best advisors Wall Street has to offer. So far, their 1997 year-to-date return is a whopping 39.5 percent, and Sinnock expects the club enjoy a return of more than 50 percent by December 31
In addition, the club has written several best-selling books, including “The Beardstown Ladies,” “Common-Sense Investment Guide,” “The Beardstown Ladies,” “Stick-In-Time Guide to Growing Your Nest Egg,” and “The Beardstown Ladies’ Guide to Smart Spending for Big Savings.” Their newest book is “The Beardstown Ladies’ Little Book of Investment Wisdom” (All books published by Hyperion).
How do their investments earn the kind of returns even Warren Buffet might drool over? Those expecting the easy answer will be disappointed. These women owe their success to a lot of good, old fashioned leg work. They buy what they know. They subscribe to a stock information service, divide up hot prospects amongst their members, and then spend a lot of time telephoning investor relations’ departments requesting more information.
“One of our tricks is that we might ask for the last two or three annual reports and read the oldest ones first,” notes Sinnock. “We’ll look at what the chief executive officer promised, and then see in subsequent reports if he or she kept those promises.”
When it comes to saving money, The Beardstown Ladies think everyone should create a “Spending Pyramid,” in which you fill in what you would like to be spending the greater part of your income on (the point, or tip of the pyramid is what you’d most like to be spending it on).
They acknowledge in “The Beardstown Ladies’ Guide To Smart Spending For Big Savings” that owning a home is usually at the top of most people’s pyramids. However, they caution against buying a big house simply to impress friends and family, or even to get the best school district.
They tell the story of a family with one child who looked for a home in Los Angeles, arguably one of the most expensive housing markets in the country. A house in the neighborhood with the best schools cost $600,000 and had property taxes that were $12,000. A house three miles away, in a secondary school district cost only $400,000 and had property taxes of $6,000. By moving to the lesser school district, the couple saved more than $20,000 a year (based on the cost of the mortgage and property taxes). They took half the money and paid for a private school education for their son, and invested the rest for his future Ivy League college tuition.
Of course, this scenario — like many strewn throughout the Beardstown Ladies’ books — may not work for everyone. To begin with, most folks aren’t in the market for a $600,000 or even a $400,000 home. And, most people don’t pay anywhere near $12,000 in property taxes. A private school may not be available nearby, and the homeowner may not have the discipline to salt away that kind of money every year and be diligent about investing it.
Still, the story is instructive in that it teaches people to think outside their normal parameters. The Beardstown Ladies recommend paying off your mortgage as quickly as possible, and staying in a home you like (and can easily afford) rather than moving up to one that’s more expensive. They suggest knowing exactly what you want and need, and how much it will cost you, before you look for a home.
And don’t be afraid to stand up for yourself: Maxine Thomas, one of the Beardstown Ladies, filed a written complaint with the Cass County Real Estate Review board when she felt her property taxes were unfairly assessed (and got a subsequent reduction).
Other real estate tips of wisdom: Get a 15-year mortgage, if you can afford it, or prepay your mortgage as much as possible; consider getting an adjustable rate mortgage instead of a fixed-rate mortgage (they can be cheaper, especially if you’re moving in less than seven years); and, negotiate with the lender to lower all points and fees.
All of the Beardstown Ladies’ books are filled with down-to-earth, common-sense tips that make you realize you don’t have to live on Wall Street to beat Wall Street. Whether you’re starting to budget and save, buy a home, or deciding which stocks to add to your portfolio, their advice is easy to digest.
In some of their books, you’ll get more than investment advice. You might get delicious sounding recipes, or a little bit of down-home wisdom like “Want what you have, have what you need. Ann Brewer likes to share what every woman needs: from birth to eighteen she needs good parents. From eighteen to thirty she needs good looks. From thirty to fifty she needs a good personality. But from fifty on, she had better have good investments”
Just like Grandma used to say.
All of the Beardstown Ladies’ books are available in local bookstores or at your local library.
October 6, 1997