Group Therapy Taking a few lessons from an investment club of psychologists
(MONEY Magazine) – Sometimes journalists begin reporting a story with a preconceived notion about what they're going to learn. That's what I thought when I heard about a Manhattan-based investment club composed almost entirely of psychologists. These are people, I presumed, with such a good handle on their emotions, on their gut feelings, that they must be fabulous investors. They must be able to take as much risk as they're comfortable with--and no more. They must be more rational than ordinary investors. Above all, they must have some stunning lessons to share with the rest of us.
I was--on some counts--not even in the ball park. Less risk-averse? Hardly. "Possibly we're a little more conservative," club member Ella Lasky told me. "I spent so many years earning my degree, I'm not about to toss it all away on some fly-by-night scheme."
Are they more rational about the markets? "I think we're able to get a grip on the fact that a lot of what happens in the markets is a kind of mob psychology," says Janet David. Yet that doesn't mean the gyrations don't affect them. "It's a challenge for all of us to avoid getting very excited or depressed whenever the market goes up or down," Lasky explains.
But on one point I was correct. This club did one really smart thing that the rest of us could--and should--emulate. Before they dived into the markets, they decided they needed an education. So they placed a call to Marlene Jupiter, the author of Savvy Investing for Women, and hired her to teach them. Jupiter started her course at the beginning: with an explanation of stocks and the market. Then she plowed through lessons on reading financial statements and, finally, into technical analysis.
She also brought in guest speakers. I sat in on the group's session on Wednesday, April 12, a dismal day in the markets, with the Dow off 162 and the Nasdaq down 286. And Prudential Securities technical guru Ralph Acampora was there to explain it all. He did it in the group's language. "I'm a market psychologist," he began. "One thing that bothered me about today and about yesterday in the market was that I didn't see fear. I didn't see capitulation, where investors throw the good stocks out with the bad. That is when the market will turn." (He was right on the ball. Two days later, both indexes saw their biggest one-day point drops ever.)
For an hour, Acampora taught, explaining different stock-picking techniques and describing his own preference for following trends in individual stocks--not only in price but also in the volume of shares trading hands. Now it would probably be impossible to lure Ralph Acampora to, say, Des Moines to give the same talk; he did it as a favor to Jupiter, who's a close friend. But many local investment professionals--from financial planners to brokers to economics professors--have a wealth of knowledge to share. It's time we started asking them.
So, how are the shrinks' investments faring? It's a rough market, but they're committed to the long haul. In fact, that's the second lesson they have to pass along. Says Andrea Schneer: "For years, we all focused on being good caregivers to others. We finally realized we also have to be excellent caretakers of ourselves."
Editor-at-large Jean Chatzky appears regularly on NBC's Today. You can contact her by e-mail at email@example.com.