Related topics: •  Elderlaw •  Financial Planning With Your Parents

The stock market may not be the most welcome place for investors these days. But that hasn't deterred some seniors from sharing investment tips. In fact, it's become an appealing way for many seniors to socialize while building their portfolios.

Eager to supplement Social Security or fixed retirement incomes, some seniors come to investing relatively late in life. But with the wealth of financial magazines and online investment Web sites available today, it's easier than ever to master the lexicon of the financial world. There are about 28 million older Americans who rely on investments for their retirement, according to AARP, the organization formerly known as the American Association for Retired Persons. The wealth created by the stock market in the past decade has drawn seniors like Bob McClow of Phoenix, Arizona, to investment clubs that focus on acquiring individual stocks.

Ten years ago, when he was 60, McClow faced retirement from his job as a purchasing manager and looked for ways to augment his retirement income. He weighed the choice of taking a pension or a lump sum payment for retirement. But he chose the lump sum instead, putting all of it into an Individual Retirement Account (IRA). In 1993, he joined an investment club and more than doubled his investment. His investment experience plays an important social as well as financial role in his life: He now teaches other people how to invest.

"Older folks need to get out and mix," says McClow, now 70. "[This] gets me out. And people ask a lot of good questions, which I either can't answer or have to find the answer to, which is a mental exercise for me."

People age 55 to 74 make up the second-largest group of individual stock owners in the country, according to a 1999 study conducted by two stock research firms, the Securities Industry Association and the Investment Company Institute. Seniors in this age group also have a substantial portion of their investments in stocks, with about 43 percent holding individual stocks.

"It used to be that in retirement, people would spend down their income. But that's not true anymore," says Louise D. Piazza, a program consultant for an investment education program sponsored by the AARP. "Seniors now have more money than in the 1980s to invest. And because of the high stock market, people are making money."

Although raised by parents who lived through the 1929 stock market crash and the Depression, many of these seniors are aggressive investors, according to the same study. About 21 percent of seniors in this age group were willing to take "above-average risks for above-average gains," compared with only 7 percent of seniors 75 and older who were willing to take the same risks.

More women have also jumped into the fray in recent years, according to the National Association of Investors Corp., a nonprofit group that focuses on investment education for individual and club members. Today, about 68 percent of NAIC members are women. "Women in this age group are earning money, many for the first time in their lives," said Piazza of the AARP.

McClow, the investor from Phoenix, says the proliferation of discount brokerages and financial information on and off the Internet has lured many late bloomers to the stock market. Only a decade ago, he says, full-service brokers charged hundreds of dollars for a single transaction. Now investors can buy or sell stock for as little as $8 a trade.

And with group names like "Majec" and the "Rainy Day Investment Club," investing isn't the serious, nose-to-the-balance-sheet business it used to be. Many seniors form clubs with close friends, co-workers, and golf and bridge partners. The clubs allow them to pool resources, sometimes as little as $20 a month, and discuss investment strategies. Instead of chatting about tee times, many exchange stock tips and discuss price-to-earnings ratios.

"It's hard to go anywhere anymore without someone bringing up a company or a stock," McClow says.

Liz Piazza, 71, (no relation to Louise Piazza) began investing to augment her income after retirement. A registered nurse and a founding member of the Rainy Day Investment Club in Sacramento, California, she was only 58 and worried about having enough money to enjoy her retirement. Today, in addition to serving as her club's vice president, Piazza makes investment decisions for herself and her husband.

Piazza's club members have shied away from high-risk stocks that may have high returns in the short term but are more volatile than lower-risk offerings, she says. The club buys stocks in companies whose products members understand. Today, Piazza says, her all-women club's stock portfolio performs better than many mutual funds.

The club is also a place to find comfort, Piazza says. When a club member reports the death of a family member, other members show their emotional support by making sure she has people to talk to. "Some of us do things with each other beyond the club," she says. Small wonder that after 14 years of investing, Piazza feels more confident about her financial future, even if she outlives her husband.

"I've thought about it quite a bit. I'll need more social support (when my husband dies) than I do now," Piazza says. "We've all become good friends over time. As you get older, and some of your peers aren't around anymore, it's more important to have support and someone to talk to."

•Educate yourself. Contact organizations that offer investment basics. Regional chapters of the NAIC, the AARP, and the American Association of Individual Investors hold investment workshops for consumers of all ages. They will expose you to the financial terms and standards you need to understand when considering buying stocks, bonds or certificates of deposit (CDs).

•Go to school. Consider taking a community college or university extension course on investing. Such courses offer tips on the best magazines and Web sites to raise your confidence in investing.

•Ask around. If you do consult a financial adviser, investigate different planners before subscribing to a particular investment plan. Many financial planners meet with clients for free, but may push certain investment products that do not suit your investment style.

•Think about how "risk averse" you are. If you don't have much time -- or the stomach -- to monitor your investments in individual stocks, consider other types of investing, such as mutual funds. It's a less risky way of getting involved in the stock market, and provides much more stable returns. You can request performance information about particular funds on the Internet or by requesting a prospectus from the company. As many people have lost money on the market as have gained wealth, seniors should proceed cautiously.

•Investigate your investment adviser. Make sure your adviser doesn't have any disciplinary actions against him or her. Ask to see what's called a "Form ADV," which lists education and investment strategies. You can check out a dealer by contacting the National Association of Securities Dealers (NASD) at 800/289-9999 or the North American Securities Administrators Association (NASAA) at 202/737-0900.

•Read agreements for investment accounts carefully. They usually spell out how much risk you will take, how investments will be paid for, who makes the decisions, and how disputes are resolved. Make sure you don't budget more for investing than you can spare from your monthly pension.

•Ask for a commission schedule. This outlines how much commission you will pay. Never make out a check to an individual broker.

•Report abuses. The NASD and the Securities Investor Protection Corp. (SIPC) offer general investment advice and help consumers with investment problems. Contact the NASD at 800/334-0668, or call the SIPC at 202/371-8300.

McClow has a few last warnings. "The ads from the brokers and mutual funds and these online traders [make it] look like you can take your laptop out on the beach and do your studies and make these wonderful decisions," he says. "You don't know where a lot of this information is coming from. People think every stock goes up, and all they have to do is buy any stock at any price. Every stock does not go up forever. It does pay to know the companies and consider their histories."

-- Psyche Pascual is the articles and book editor at Consumer Health Interactive.

Further Resources

American Association of Individual Investors

Chicago, Illinois

312-280-0170

References

First published July 24, 2000
Last updated April 30, 2007
Copyright © 2000 Consumer Health Interactive

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