Beardstown Ladies sing this song, dodah, dodah.
Beardstown Ladies Add Disclaimer That Makes Returns Look 'Hooey'
By CALMETTA Y. COLEMAN
Staff Reporter of THE WALL STREET JOURNAL
CHICAGO -- The Beardstown Ladies, those gray-haired investment gurus from a small town in Illinois, have achieved national prominence and best-seller acclaim for their down-home financial wisdom.
So why would a 36-year-old reporter named Shane Tritsch, writing in the current issue of Chicago magazine, call their spectacular returns "hooey?" And what are the ladies, average age around 70, going to do about that insolent whippersnapper?
The controversy revolves around an inconspicuous disclaimer tucked away on the copyright page of the 1996 edition of "The Beardstown Ladies' Common-Sense Investment Guide," a book that advises folks to invest regularly in well-known companies for dependable gains.
A 23.4% Return?
The disclaimer says that the ladies' annual return over the decade covered in the book -- which they have put at 23.4% -- "includes the dues that the members pay regularly." The disclaimer adds that "this 'return' may be different from the return that might be calculated for a mutual fund or bank." The disclaimer wasn't included in previous editions of the book.
In other words, the ladies' club apparently added its own monthly membership dues to the gains from stock appreciation and dividends in calculating the overall return.
That's not exactly how, say, Vanguard does it.
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For the Beardstown Ladies, the implications of the disclaimer are significant. During the decade they wrote about, their monthly dues averaged $400, for an annual total of about $4,800. In some of those years, the total value of the club's portfolio was around $30,000 to $40,000. So just the dues, if counted as appreciation, would have given them double-digit growth in those years. That might also explain why the club often seemed to outperform indices like the Standard & Poor's 500. |
