Investment Club Performance

Investment clubs serve many useful functions.

• They encourage savings. 
• They educate their members about financial markets.
• They foster friendhsips and social ties.

 Unfortunately, their investments do not beat the market. 

Ref:  Barber, Brad, and Terrance Odean, 
"Too many cooks spoil the profits:  Investment Club Performance." 
Financial Analysts Journal, Jan/Feb 2000, 17-25

Using data from a large discount brokerage firm, Barber and Odean looked at the performance of 166 investment clubs over the period 1991 through 1997.  They found that these clubs tended to purchase high-beta, small-cap growth stocks and had an average holding period of about 18 months.  They found that 60% of the clubs underperformed the market, by an average of 3.7 percentage points per year.