In Focus

To Spank or Not to Spank

Note: This article focuses on Step 7 of Starting An Investment Club. For articles focusing on other Steps, see the links at the bottom of the page.

I remember when my husband and I first talked about getting married. One of the questions he raised was, "How many children do you want?" Barely a second went by when he asked, "Do you believe in spanking?" Oh man, spanking? Did we really have to talk about spanking when we were so in love? I just wanted romance, to get married, and have babies.

But, as usual, Phil was right in asking. He was right in getting the issue out on the table before we got married and actually had those children. We discussed everything from what kind of education we wanted to give them to how we thought we should discipline them. Raising children has been fun and easy (so far) and I am sure it is because we had such similar ideas from the beginning. And we knew where we stood. As things came up - and they always do - we already had an unwritten parenting philosophy in place. And if you ask me, I think that's half the battle, getting a plan, and sticking to it.

The same goes for an investment club. You need a plan; an investment strategy plan. You need some guidelines that your club members can follow and stay within. If everyone is on the same page from the beginning of the club, there are no wacky surprises coming from left field. How would you deal with someone trying to convince the club to buy a "hot-tip" stock? You'd find yourself saying, "Who asked this person to be in the club? Didn't they know we were investing for the long term and wanted no part of buying a High-Risk-Sell-A-Day-Later gambling stock?" If you don't have a philosophy from the start, your club will go off in so many different directions it'll give new meaning to being bent out of shape. But if you do have a philosophy, you will be able to say, "Thank you Georgie, but that stock doesn't fit our philosophy. Why don't you buy it for your own personal portfolio and tell us all about it later?"

The reason we suggest the Chicks' Dozen philosophy is that it is very simple. It is an easily understandable starting point. It gives you a base to work from on your way to a personalized philosophy. The Chicks Dozen is a combination of a few approaches -- the Motley Fool Rule Maker method merged with some of Peter Lynch's and Warren Buffet's ideas. It works great for us, but might not for you. That's okay. I don't parent like my sister does, and I don't discipline like my parents did. The same goes for a club; you fine-tune the philosophy to fit your own club. Some things you might not even know need modification until you are up and running. (Who would have thought the "How much is too much make-up" talk would be at age 13? So much for my strict rule that no mascara would be worn until she could drive.)

If you are not comfortable with the Chicks Dozen philosophy, check out www.fool.com. They have more than eight different ways to invest. They have the Motley Fool Rule Maker, the Motley Fool Rule Breaker, the Drip approach, the Foolish Four -- and the list goes on. Maybe your club chooses an even easier route and just wants to invest in an S & P 500 stock fund. Or maybe you want to try a more complicated approach with the Philip Fisher philosophy. (His book is called Common Stocks and Uncommon Profits.) There are so many different investment philosophies to choose from that just naming them all gets confusing. We devised the Chicks Dozen to fit us. I would have no qualms about your club adopting something totally different: my point is, you just need to have one.

Like parenting, an investment club can be fun and easy, as long as you have a philosophy. Remember, getting the plan is half the battle, but after it's in place, you'll have made it through the toddler years and are ready to sail on to graduation. By the way, I never did answer the spanking question, and he married me anyway.

Articles focusing on the Steps To Starting An Investment Club

Step 1: Begin with the Right People

Step 2: Establish Your Club Size

Step 3: How Much Per Month?

Step 4: Format Schmormat

Step 5: The Teeter Totter of Timing

Step 6: Be Prepared, Partner

Step 7: To Spank or Not to Spank

Step 8: About Our Message Boards