The National Association of Investors Corp. (NAIC), popularly known as BetterInvesting, is a prominent nonprofit organization focused on investor education and fostering long-term investment success. Established in 1951, this organization has brought together investment clubs and individual investors from across the United States, advocating for the principles of sound investing.
Overview of BetterInvesting
Headquartered in Madison Heights, Michigan, NAIC serves as an umbrella entity guiding approximately 3,000 active investment clubs and more than 34,000 individual members, as of the end of 2018. Initially founded under the name National Association of Investment Clubs, the organization emphasized education and community building among investors.
With its rebranding to BetterInvesting in 2004, the organization enhanced its outreach, connecting with a broader audience of investors. NAIC publishes a bimonthly magazine titled BetterInvesting, which serves as an essential resource by providing valuable insights, tips, and market analysis to its readers.
Mission and Educational Offerings
The primary mission of the NAIC is to demystify the investing process and empower individuals to make informed financial decisions. In particular, the organization focuses on educating members about:
- The benefits of long-term investing in common stocks
- Understanding stock and bond mutual funds, especially pertinent in today’s environment of defined-contribution retirement plans, such as 401(k)s
To achieve these goals, NAIC offers various resources:
- Online Tools: Depending on their membership level, members have access to tools that help evaluate stock quality and pricing, fostering informed investing decisions.
- Webinars and Seminars: Educational webinars, local chapter events, and seminars provide practical training, guiding investors through various investing strategies.
- Stock Studies and Guides: Members benefit from First Cut Stock Studies contributed by the BetterInvesting community that these studies are tailored to educate about potential investments.
The NAIC approach combines educational resources with practical tools, enabling members to develop a disciplined investment strategy.
Core Principles of NAIC
The NAIC is founded on four core principles that every successful long-term investor should follow:
-
Invest Regularly: Adopting a consistent investment schedule ensures a more manageable approach to market fluctuations. This technique is often referred to as dollar-cost averaging.
-
Reinvest All Earnings: Compounding returns can significantly enhance overall investment growth. By reinvesting dividends and earnings, investors can take full advantage of their investments over time.
-
Invest in Growth Companies: The NAIC emphasizes the importance of investing in companies that exhibit strong growth potential. This principle is central to the NAIC's investment philosophy and is reflected in their Stock Selection Guide.
-
Diversify: Risk reduction is an essential strategy in investing. By spreading investments across various sectors and asset classes, investors can shield themselves from market volatility.
Tools for Investors: The Stock Selection Guide (SSG)
A cornerstone of the NAIC's methodology for evaluating potential stock investments is the Stock Selection Guide (SSG). Developed by founder George A. Nicholson, the SSG is a concise two-page document featuring a semi-logarithmic graph.
Key elements within the Stock Selection Guide include:
- Historical Performance: The SSG provides a detailed look at a company’s sales and earnings per share (EPS) for the past ten years, enabling members to assess historical business performance.
- Profitability Indicators: Metrics such as pretax profit margins and return on equity help determine whether the company is well-managed.
- Valuation Metrics: Investors can access essential price-earnings ratios to evaluate the stock's current pricing against historical data, helping them judge if the stock is reasonably priced.
The SSG aims to answer two fundamental questions that all investors face:
- Is the company well-managed?
- Is this stock priced fairly relative to its growth potential?
Conclusion
The National Association of Investors Corp. (NAIC) plays a crucial role in helping individuals navigate the complexities of investing in today’s market. With a range of educational resources, core investment principles, and practical tools like the Stock Selection Guide, NAIC effectively empowers its members to become informed and successful long-term investors. As the landscape of investing continues to evolve, organizations like BetterInvesting remain integral to fostering a community of knowledgeable and confident investors.