Overview
– The National Association of Investors Corp. (NAIC) is a U.S. nonprofit investor-education organization founded in 1951. It operates under the public brand BetterInvesting and is headquartered in Madison Heights, Michigan.
– NAIC/BetterInvesting is a 501(c)(3) organization whose mission is to teach and train individuals to become more successful long-term investors—primarily in common stocks and, more recently, stock and bond mutual funds and retirement-plan investing.
– At the end of 2018 the association supported roughly 3,000 investment clubs and more than 34,000 individual members (source: Investopedia).
A short history
– Founded in 1951 when three investment clubs formed a national association (originally named the National Association of Investment Clubs).
– The member magazine, BetterInvesting, became the association’s public brand in 2004; the organization is commonly referred to simply as BetterInvesting today (source: Investopedia).
Core mission and emphasis
– NAIC/BetterInvesting focuses on investor education and promoting long-term, disciplined investing.
– The association stresses a set of investing principles (four core principles are emphasized by the organization) and emphasizes investing in quality growth companies as the central tenet of its method (source: Investopedia).
Key tool: the Stock Selection Guide (SSG)
– The Stock Selection Guide (SSG) is NAIC’s signature evaluation tool. Created by George A. Nicholson at the organization’s founding, the two-page SSG includes:
• A semi-log graph of a company’s 10-year sales and earnings-per-share (EPS) history.
• Measures such as pretax profit margins and return on equity (ROE).
• Five-year annual high and low price-to-earnings (P/E) ratios.
– The SSG is designed to answer two practical questions: Is this a quality growth company? And, is it selling at a price that can provide an acceptable potential return? (source: Investopedia)
Membership benefits and services
– Membership levels provide access to:
• Online research tools and stock-scoring utilities.
• Educational webinars and seminars.
• “First Cut” stock studies contributed by the BetterInvesting community.
• Digital and print editions of BetterInvesting magazine.
• Local chapters and club support.
– The organization also provides classroom-style investor education for individuals and investment clubs (source: Investopedia and BetterInvesting materials).
Practical steps — How to use NAIC/BetterInvesting (for individuals and clubs)
1. Define your investment objectives and time horizon
• Decide whether your goal is retirement growth, income, education savings, or general wealth-building. NAIC’s approach is geared toward long-term stock growth.
2. Learn the principles and tools
• Study the BetterInvesting principles and get comfortable with the Stock Selection Guide (SSG). The SSG helps you examine historical sales, earnings, margins, and valuation history.
3. Join as an individual or form/join an investment club
• Benefits of clubs: shared research, group discipline, pooled learning and accountability.
• If you start a club, establish a charter: membership rules, meeting frequency, research roles, record-keeping, and voting procedures.
4. Use a systematic research process
• Screen for companies that show consistent revenue and earnings growth over time.
• Evaluate profitability (margins, ROE) and historic valuation ranges (P/E highs and lows).
• Use the SSG or BetterInvesting online tools to standardize analysis and compare candidates.
5. Evaluate price vs. potential return
• A company can be high-quality but overvalued. Compare current price to historical valuation and projected growth to estimate potential return.
6. Build a diversified, long-term portfolio
• Spread risk across sectors and market caps, and avoid overconcentration in a single stock.
• Rebalance periodically and continue regular research.
7. Use education resources and community input
• Attend webinars, read BetterInvesting magazine, and review “First Cut” stock studies contributed by members.
• Leverage local chapters and online communities for feedback and accountability.
8. Monitor, document, and learn
• Keep clear records of research, buy/sell rationale, and performance.
• Review holdings against your criteria and adjust as new data arrives.
Practical steps — If you want to start an investment club (concise checklist)
1. Recruit members who share the same long-term goals and time commitment.
2. Create bylaws: meeting schedule, dues, investible funds, voting and transaction rules.
3. Assign roles: president, treasurer, secretary, research leads.
4. Open a brokerage account in the club’s name and establish record-keeping procedures.
5. Adopt a research process (e.g., SSG-based screening and documented buy criteria).
6. Hold regular meetings to present research, vote on trades, and educate members.
Things NAIC/BetterInvesting emphasizes (summary)
– Long-term ownership of common stocks as a wealth-building strategy.
– Focus on fundamentally strong growth companies.
– Discipline: research-driven investment decisions, not speculation.
– Education, community, and standardized tools (like the SSG) to reduce bias and improve consistency.
Limitations and considerations
– The SSG and NAIC methods rely heavily on historical financials; past performance is not a guarantee of future results.
– Individual investors should also consider macroeconomic factors, sector shifts, and company-specific risks that may not be visible in historical trends.
– NAIC’s membership and club model suits investors who want education and group feedback; it is not a substitute for personalized financial advice from a licensed advisor.
Where to learn more (sources and official pages)
– Investopedia overview of NAIC:
– BetterInvesting (official organization formerly known as NAIC): betterinvesting.org (official site with membership details, the SSG, webinars, and local chapters).
Conclusion
NAIC, now commonly called BetterInvesting, is a long-standing nonprofit dedicated to investor education and to helping individuals make disciplined, long-term investments in stocks (and mutual funds). Its hallmark tools, community-based clubs, and education resources aim to improve individual investor outcomes through consistent research practices—most famously the Stock Selection Guide. For investors seeking structure, peer learning, and a fundamentals-based approach, BetterInvesting is a practical resource to explore.
Sources
– Investopedia: “NAIC — National Association of Investors Corp.” (source URL provided by request)
Stock Selection Guide (SSG): the two key questions
The SSG was designed to answer two fundamental investor questions:
– Is this a quality growth company (consistent sales and earnings growth, healthy margins and returns)?
– Is the stock currently priced so that, if the company continues to perform, the purchase will provide an acceptable rate of return?
The SSG organizes 10 years of historic data (sales and EPS), margins, return on equity, and five years of high/low P/E ranges into a compact, visual form (the semi-log graph is particularly useful to spot secular trends). BetterInvesting also uses an “expected growth rate” concept to estimate future performance and then compares that to current price to determine potential return.
How the NAIC / BetterInvesting method differs from some other approaches
– Emphasis on company fundamentals and long-term growth rather than short-term technical trading.
– Standardized, repeatable screening and analysis (the SSG) so individual members and clubs can share consistent studies and educational feedback.
– Club-based learning—members analyze stocks, vote on purchases, and learn by doing in a structured group environment.
– Education-first: workshops, First Cut studies, webinars and magazine content to raise investor competence.
Practical steps for using NAIC/BetterInvesting approach (individual investor)
1. Learn the method
• Read BetterInvesting materials (magazine issues and online lessons), watch webinars, and practice completing SSGs on past winners and losers to train judgment.
2. Define goals and time horizon
• Decide your target annual return, acceptable risk, and how long you plan to hold. BetterInvesting focuses on long-term (multi-year) investing.
3. Build a watchlist
• Use screening tools (growth, profitability, debt, industry position) to generate candidates for SSG analysis.
4. Complete an SSG for each candidate
• Plot 10-year sales and EPS, compute margins and ROE, note payout policy and balance-sheet health, and enter the market price and P/Es.
5. Judge company quality and durability
• Look for consistent sales and earnings growth, expanding (or stable) profit margins, low or manageable debt, and high returns on equity relative to peers.
6. Estimate expected growth and potential return
• Use the BetterInvesting method (expected growth vs. required return) to estimate whether current price allows an acceptable outcome.
7. Decide and document
• If the SSG and judgment support a buy, set an entry rule (full buy, phased buy, or limit order). Record the rationale.
8. Monitor, not micromanage
• Re-run SSGs periodically, track news, and only act on changes in fundamentals or valuation; avoid trading on short-term price swings.
9. Rebalance and diversify
• Maintain sector and concentration limits. Sell when fundamentals deteriorate, valuation becomes extreme, or your financial goals change.
10. Keep learning
• Review club studies, read First Cut reports, and participate in webinars to refine skill.
Practical steps for starting or joining an investment club
1. Decide club structure and legal setup
• Typical forms: partnership or LLC. Draft bylaws covering membership, contribution schedules, voting rights, recordkeeping, and tax handling.
2. Agree investment policy
• Define objectives (growth, income, tax-advantaged), purchase procedures (who researches, how decisions are made), and diversification rules.
3. Choose meeting cadence and roles
• Weekly/biweekly/monthly meetings; assign officers (president, treasurer, SSG preparer, education liaison).
4. Adopt analysis tools
• Use the SSG as the club’s core analytic tool; subscribe to BetterInvesting resources for templates and training.
5. Create an education plan
• New members practice with mock SSGs; veteran members lead workshops on valuation, financial statements, and behavioral traps.
6. Maintain transparent records and taxes
• Keep minutes, trade logs, cost basis records, and issue annual K-1s or other tax forms as required by the club legal structure.
7. Review performance and process
• Periodically evaluate returns vs. goals and improve the decision-making process.
Example: Walkthrough of a simplified SSG-style analysis (hypothetical company)
Company: Acme Widgets, Inc. (ticker: AWIG) — hypothetical numbers used to show the process.
Step A — Gather 10-year history highlights
– Sales: steadily up from $400M to $1,200M (compound annual growth rate ~12%).
– EPS: from $0.50 to $2.50 (CAGR ~16%); stable upward trend, no big volatility.
– Pretax profit margins: improving from 8% to 14%.
– Return on equity (ROE): averaging 18% over the last five years.
– Debt: manageable; debt-to-equity 0.4.
Step B — Valuation context
– Current price: $50
– Current EPS (last 12 months): $2.50 → trailing P/E = 20x.
– Five-year annual high/low P/E range: 28x / 12x.
Step C — Judgment: quality growth?
– Sales and EPS have grown consistently; margins and ROE are strong and improving: qualifies as a “quality growth company.”
Step D — Is price reasonable?
– If expected growth rate (company guidance and analyst consensus) is ~12% and you require 10% annual return, paying 20x trailing earnings might be reasonable, but a lower P/E provides more margin of safety. Consider a phased purchase or waiting for a pullback toward the historical mid-range P/E (e.g., 16–18x) unless catalysts justify the premium.
Step E — Action
– Club decides: buy 25% of intended allocation now, remainder on pullback or if fundamentals improve.
Common mistakes and pitfalls to avoid
– Chasing hot stories without rigorous SSG-style analysis.
– Overconcentration in one stock or sector—clubs and individuals should set clear diversification limits.
– Ignoring balance sheet weakness—growth with poor capital structure is risky.
– Letting emotions drive trading—use documented buy/sell criteria.
– Neglecting tax implications—clubs and individuals should understand taxable events and holding-period effects.
Tools, resources and membership benefits
– BetterInvesting provides SSG templates (digital and print), First Cut stock studies from community members, webinars, local chapter support, and BetterInvesting magazine. Members may access online tools that simplify SSG calculations and screening.
– Many brokerage platforms and financial data services can supply historical sales, EPS, margins, and P/E history needed to complete an SSG.
– Peer feedback through clubs or local chapters strengthens analytical rigor and helps newer investors avoid common errors.
Measuring success beyond short-term returns
– Education and skill development: members should track improvement in investment discipline and analytical consistency.
– Process adherence: consistently follow SSG completion, documented rationale, and vote-based decisions if in a club.
– Long-term performance versus goals: evaluate 3–5 year performance relative to the goals and benchmarks established up front (e.g., S&P 500, target return).
Concluding summary
The National Association of Investors Corp. (NAIC), now generally known as BetterInvesting, promotes a structured, education-first approach to long-term stock investing centered on understanding company fundamentals and reasonable valuation. The Stock Selection Guide (SSG) is the NAIC’s signature tool: a two-page, semi-log visual that condenses 10 years of key financials and valuation context into a format designed to answer whether a company is quality and whether the price offers acceptable expected returns. Individuals and clubs using the NAIC/BetterInvesting method follow disciplined steps—learn the method, analyze with the SSG, set clear buy/sell rules, diversify, and keep learning. For those who prefer learning by doing, joining or forming a club provides peer feedback, shared responsibility, and ongoing education. When applied consistently, the NAIC approach aims to help investors build a high-probability, long-term-oriented portfolio powered by fundamental research and patient decision-making.
References and further reading
– Investopedia, “National Association of Investors Corp. (NAIC)”
– BetterInvesting, “Our History of Helping Stock Investors”
– BetterInvesting, “Fact Sheet 2019”
– BetterInvesting, “BetterInvesting Mission & Method of Stock Investing”
– BetterInvesting, “Individual Investors”
– BetterInvesting, “What Are the BetterInvesting Principles?” —