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still on the money

Beardstown Ladies
still on the money

After five books and numerous television appearances, the ladies have become revered as investment gurus, even accepting positions as paid experts on money management. Until last week, that is.
The trouble started with a disclaimer in a recently published edition of one of their books that stated investment returns included dues paid by the members. It’s doubtful that the subtitle of one of their books–“How We Beat the Stock Market and How You Can, Too”–meant including additions to principal and counting it as appreciation.
Professional money managers also would produce exceptional returns if performance was calculated this way–but they’d lose their jobs in the process. In essence, these dues may have accounted for the exceptional returns claimed by the ladies, and, if true, this reduces their stature to that of mere mortals.
A few observations are appropriate here. The idea of a group of elderly women outperforming professional stock pickers certainly has its appeal. And with so few investors beating the broad markets in the past few years, this group’s feat seems all the more remarkable.
However, all too often, too much is made of “beating the market.” It’s doubtful that the ladies would have achieved the level of notoriety that they have enjoyed if their books had simply been a compendium of sound investment wisdoms. After all, there was nothing ground breaking in the books, just good investment advice as they had learned it through forming an investment club.
It was the outperformance that drew the attention of individual investors and the media alike. And without this superior performance, one wonders if readers will continue to follow the ladies’ sage advice. After all, a book entitled “How We Managed to Perform Pretty Much in Line With the Broad Stock Averages” isn’t likely to set the literary world on fire.
Cynics have adopted an “I told you so” attitude, which is unfortunate. For even though the Beardstown Ladies’ returns don’t seem to quite add up to world-beater status, they likely performed quite well just the same.
But more importantly, they introduced thousands to sound money-management practices and induced many who thought they could never master basic investment concepts into taking charge of their finances. And if some of these new investors were successful enough to have outperformed the market, then good for them.
They just might want to hesitate, though, before seeking a book deal.
(Stephen C. Krauss is vice president with Marine Midland Bank’s trust and investment group.)


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