Investment Clubs

Athletic81

Hi

Is anyone here involved in any investment clubs, I was thinking about joining one, or perhaps setting up one here for MSE?

Thanks

Lazy_Runner

I have been involved with an investment club which has now folded. Just some things you need to think about.

Monitor money in/out and share purchases/sales very carefully. This is for the taxman and yourselves. If people want to join/leave at a later date, you will need to give them an accurate valuation. You need somebody who is organised and good with figures who is a member to take on this role.

It helps if everybody uses the same methodology to select stocks, but might be looking at different sectors of the market. If you have a common base to compare the stocks then the discussion will be more productive.
One way to do this is decide on a methodology and everybody has to attend a course / read a book within 3 months of joining.

One of the reasons are club folded was that we were losing money. We took risks that didn't meet our investment criteria and so the investments lost money. This meant that the club was worth less than what had been put in by the members. So as a club you need to agree your investment criteria for both buying and selling.

I would suggest a minimum of four people; chairman, secretary, treasurer and trader. It is helpful if you can have two traders who can see the same trading account so that they can keep checking what is being traded and for how much i.e. act as a check on each other.

You need to keep minutes of meetings detailing what was decided and why. Also you need to detail why certain stocks were bought that is how did the stock meet you investment criteria. Also why a stock was sold, again why it fell foul of your investment criteria. When you tell the trader(s) to buy a stock, you need to set an entry price band, the stop loss price and a target price. Again you need somebody who is organised and good at minute taking to record these decisions, especially if the trader forgets the prices set at the club meeting.

That is just initial thoughts. I am sure others can come up with other suggestions on how to run an investment club well.

Good luck.

Ian_W

I'm not and never have been involved in one but I subscribe to WhatInvestment [there's a special offer of 12 issues for £1] and they've been running a series of articles about them by a guy called Terry Bond who's been involved with them for many years. Separately, but tied-in, they also focus on a club each month to cover some issues that arise like how they dealt with NR shares - did they buy, sell or avoid?
All the points that Lazy Runner has made and many others have come up in the articles but a common theme I picked up was the need [by appointees or the whole club] to make quick decisions between meetings.
From those articles I think it really helps if you have a common bond like working together, membership of a club, locals at a pub for example so I think MSE might be too diverse and spread out to be viable.
Others may have a different view.