HOW AN INVESTMENT CLUB WORKS IN ZAMBIA: CLUB ADMINISTRATION TIPS FOR INVESTMENT CLUBS IN ZAMBIA
The objectives
of an investment club are threesome, which is; Education; Networking; and Investments.
For an investment club to meet there objectives, these are some guidelines
which need to be in place. These are the conditions that are met and basic
rules that are followed. Each member of the investment club needs to be certain
of these, and if the members are not disciplined, and do not follow them, then
the likelihood of having a successful investment club will be
slim.
Networking/Meeting
“the most successful clubs are
made of self-driven members”
-Rwoth Ramogi
An Investments Club is a member
organization that facilitates an environment where members can develop a better
understanding of investment strategies while interacting with professionals in
the investment community. The interaction, or networking, is achieved through
various structures as below:
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Membership
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Recruitment Strategy
An investment club is only as strong as
its membership. The members should be responsible, reliable people who are
eager to learn. After knowing what it is I want my club to do and what type of
legal structure I want for it, then I will embark on recruiting members. This
is the first step towards officially starting my investment club. Prior to my first meeting with those
people interested in joining my investment club I should provide them with
information about the club. This includes letting them know what the club is
going to be about and how it should be run. As founder, or founders, we do have
a choice as to who we invite in to the club. Discrimination laws
notwithstanding, founders can set out specific parameters which potential
members have to meet in order to ensure the right mix.
I should not be too concerned if the
majority of the people who have expressed an interest in joining my club are
all new to the stock market, or investment arena. In fact, this can be a good
thing that my club is composed of people who have no real expertise in the
market. People who have prior experience with the stock market may quickly
become frustrated dealing with amateurs. I should not be worried about being
part of a group of people that have no experience since there are many
resources that are available to help us learn about investing.
The ideal membership would comprise a
few analytical minds, a good accountant, an experienced captain at the helm,
and IT whiz and a good administrator. An enthusiastic core membership with the
ability and desire to achieve a common goal will take our club a long way.
Partners ought to be permitted to
invite guests to attend regularly scheduled meetings. Further, the guests are
required to actively participate in discussions and activities for one month
before consideration is given to adding the guest to the Investment Club. Most
investment clubs have a limited number of members, and should the limit be
reached, and other interested parties wish to join; a waiting list will of
prospective Partners shall be maintained.
The acceptance of a new partner requires a vote that achieves two-thirds
simple and weighted majority in favor of adding that partner.
Further, while recruiting, I need to
appreciate the need for a particular size of the investment club. Studies show
that a good size for an investment club is approximately 12 to 18 members. I
will aim to form a club with roughly 12 to 18 members, give or take a few. Too
few and I may have trouble accumulating funds to invest. Too many and I will
have trouble having quality discussions and finding a place to meet. A number
below 20 allows the possibility to register as a limited partnership, which by
law, cannot be over 20 members. When I limit the size of the club to this many
members I am still small enough to hold meetings in member’s homes.
Further, an investment club should
avoid personal disagreements which most likely sprout out of romantic
relationships gone sour; rather, it should have spouses, or those in a
committed relationship, like engaged partners.
I will need to find members to join my investment club and I can
achieve this in three ways.
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Friends/Discipleship: I should start talking with friends
and see who's interested. If I have one or two friends who have shown a mutual
interest in the stock market or bond market I can approach them to join my investing club. It is best to gather a variety of
people who will bring to the club a variety of interests, experiences, and
perspectives. Once I find a few interested friends, I will let them invite a
few of their own friends; this is discipleship.
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Word-of-mouth: Word-of-mouth, regarded as one of the
best forms of marketing, should soon see potential members eagerly offering
their resources, particularly after the word is out that we have managed to
complete a profitable trade, or even based on the idea.
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Advertisements: I can find other people who are
interested in joining in my investment club by advertising in the newspaper or
by posting notices on community bulletin boards. The important thing to
remember is that I want to attract people who have an interest in learning more
about the stock market while they invest small amounts of money.
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Registration
After recruitment, the next stage is
the registration of the members who are interested. This allows the club
secretary to take email address and contact details for communication
purposes. Every prospective individual
also get a membership card.
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Application Form/ Member Interests List
Further, there should be an application
form that all members must fill out in order to gain some information on the
background and experience of members. There should be made by the secretary a
list of member interests and expertise. This is important so that as we begin
hunting for companies in which to invest, everyone gets to choose an industry
of interest to him. This helps in creating competitive advantages since people
will carry out tasks in the club according to their strengths, and not
weaknesses. As Peter Lynch likes to point out, it is a great strategy to ‘buy what you know.’ It is probably best
restated as ‘research what you know.’
If a member is in the chemical business, she might volunteer to look into companies
in that industry, choosing a few for a close look. If a member is an avid
golfer, she might look into golf-related companies. It is a good idea to make a
list of the industries with which my club members are familiar.
However, it is important for the
members to be humble, even though experts. Experts need to be humble, since we come together to do things
which we could not do alone.
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Additional Recruitment of New Members
The
recruitment or selection of a new member is conditional upon there being no
objection from a member at the meeting at which the application is considered.
The club reserves the right to refuse admission to any person without giving a
reason. On admission to the club, a new member will sign an agreement accepting
all responsibilities associated with membership. The new member should pay the
initial lump-sum subscription and the first month's subscription. These sums
will purchase for the new member a number of units calculated according to club
rules and the unit value prevailing at the time of joining.
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Withdrawal of Membership
A
member should cease to be a member of the club as per the constitution or club
agreement and by-laws. If a member should die or cease to be a member for any
reason, the club should pay to the member or to persons entitled by law an
amount equal to the member's share in the assets of the club.
Resignation
of membership must be submitted in writing to the Chairperson, Finance Officer
or Secretary before the monthly meeting at which the resignation is to take
effect. Members leaving the club, whether by resignation or as the result of
termination of membership, should sell back to the club their entire holding of
units. The amount to be paid to a member
leaving the club should be calculated by multiplying the total number of units
held by the member by the unit value declared by the Finance Officer at the
club meeting at which the resignation became effective, subject to deduction of
club brokerage if such should be in force at that time and any legal fees
incurred by the club in connection with the withdrawal of the member. Any
surplus cash held to the member's credit will be added. Payment to the member
who has left the club should be made as soon as possible.
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Club Fees
Investments Club membership should have
a cost, depending on the club membership agreement. The costs may be different
depending on the types of members.
An investment club should have joining
fees which act as commitment fees. It also helps in the opening of brokerage
accounts, bank account, registration of the investment club and obtaining
trading licenses. The joining fee also buys a number of Units of shares.
Receipts are issued for all the monies received.
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Monthly Investment Fees
Club members should be committed to
paying monthly investment fees. Members should come to a mutual agreement upon
how much money they are each going to contribute each month for purpose of
saving-2-invest. This amount should not be as high in the beginning, but it is
related of the final dream of the club. Members can always increase the amount
at a later date. The club should allow members to contribute more than the
monthly minimum if they so desire.
Each member's investment fees will
purchase for that member an appropriate number of units according to the unit value
declared at the monthly meeting preceding the date when the subscription was
paid, subject to club brokerage if such should be in force at the time.
It is important to note that no member
should have over 25% of clubs ownership. If any members’ assets become greater
than 25% of the total assets of the club, the member should cease contributions
until the value of those assets are below 25% of the total assets of the club.
If the investment club is a company,
the investment fee is recorded as investing
capital in the cash flow, whereas in clubs which operate as partnerships,
associations, business names with constitutions, and cooperatives, the monthly
contribution purchases additional shares right away and share certificates
issued. The investment club operating as a company can also issue unpaid
shares, and then the members purchase them through the monthly contributions. In
the alternative, partnerships can issue units
points, and members purchase the same at a certain value, based on the
asset base/net asset value (NAV).
The
club should also have monthly dues to help to pay for events that we attend;
gifts for guest speakers, social meetings, registration fees of the club; and
minor overhead expenses. This also covers subscription to associations,
magazines, or purchase of reading materials, and networking events payments.
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Meetings
“Eighty percent of success is
showing up.”
-Woody Allen
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The Four Types of Meetings
An investment club has several types of
meetings, depending on the structure of the club. These
meetings serve as networking fora, learning/education classes, and also an
occasion and venue for members to contribute for purchasing stocks, mutual
funds or other types of investments.
As a requirement, investment clubs are
filled with active participation. From researching stocks and companies to
seeking out asset management software and recruiting new members to the group,
they are not only a sink of money but also of time. Everything is shared-from
research to investment choices to successes and failures. The investment club
will take my money and use it to make more money for me. As club members, we
agree on financial strategy and mutual financial objectives that are strictly
adhered to. This makes it easier to select opportunities that are right for the
club. The club hence serves to pique the interest of members with regard to
investments, the world of finance, and the current events in the world around
them. The club also emphasizes cross-disciplinary skills such as research,
report writing, leadership skills development and public speaking. In addition,
club involvement also leads to an increasing financial awareness related to
common sense saving, budgeting; long-range planning, social networking and goal
setting that will benefit the club members in the future.
It is important that members of the
group are able to attend all meetings, and they are part of the decision making
process. If the group decision is held up because some members do not attend
regularly, the endeavors of the investment group are jeopardized. For this
reason,
there
should be fines for those who do not attend with no prior notice, and or valid
reasons.
At a minimum, a club should have the following meetings:
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Weekly Meetings
The club should meet for an average of
two hours every week. These are social networking and education meetings. Every
meeting discusses matters of business and finance, and other important human
development skills of leadership and effective communication. Such weekly meetings should cover two major
topical areas of Personal Branding and
financial literacy, as below:
Personal Branding/Self-Help Training: Personal Branding is the greatest form
of investment, involves engaging in activities which enable me to identify
& develop my talents and skills; realize my potential; and achieve my
dreams & aspirations so as to enhance the quality of my life and contribute
to the community. Two guides to Personal Branding are Rwoth Ramogi’s The
Gift of E11even Moves to Make Me Wealthy, which teaches me the eleven areas
that I need to develop to enjoy the complete and wealthy lifestyle, which are health,
relationships, riches/money, career, adventure, happiness, dreams & goals,
positive attitude, controlling the day, helping people and being
peaceful); and Talanta: Rwoth Ramogi’s
Guide to Identifying, Developing & Selling My Talent & Career Skills. The
life skills imbibed are an essential ingredient for professional and personal
success.
Investment/Financial
Literacy Training: Financial literacy is
the financial knowledge that enables the club to confidently make informed and
effective decisions on how to acquire,
manage and use money. The knowledge includes both
information and experience. My child has to get as much financial
information, which can be in any of the three ways of getting education, that
is, through formal education, apprenticeship or personal reading and self-coaching; and he has to amass experience
and horn his skills by applying the information he so learns in daily
experiences. This mix of information and experience is what creates true
knowledge. Other topics that speakers should discuss include Current Market Conditions, Market Forecasts,
Investing Strategies and Investment Analysis and Entrepreneurship.
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Monthly Meetings
These meetings serve as an occasion for
members to contribute to their monetary fund, which is intended for paying for
stocks and shares, mutual money as well as other kinds of feasible investments.
These meetings also serve to review club’s investment portfolio and discuss
further purchases/sales, the stock market in general as well as debate new
companies.
These are special events meetings
called upon to discuss urgent issues, or when there is an important guest in
town that the club invites to talk to them. The special events meetings may
also be held to welcome new members. These meetings are also when the members
to help the needy and sick in the community through charity work and
contributions.
At each annual general meeting, a
statement of account should be given by the Finance Officer, together with the
report of the auditors. The Finance Officers report should include a full
record of the clubs income and expenditure; a list of the clubs assets together
with it is end -of -year valuation; also a capital account for each member
showing his/her total contributions and drawings together with the current
value of his/her holding. At these meetings, a report is given of investment
club activities, investment transactions, performance analysis, portfolio
management and lessons learnt and threats faced, opportunities for growth and
weaknesses.
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Meeting Times & Place (Office)
An investment club needs to agree on a
regular meeting time, place, length, and format of the meeting. One reason to
try and keep a club size to limited members is that it permits meetings to be
held in living rooms. Another possibility is to seek out some other space, like
a local library or church. A coffeehouse might also work. Further, perhaps a
member has an available meeting room at his workplace. The club members then
will decide when to meet, and how often. Most clubs meet once a month. This
will help members keep meetings running efficiently and prevent someone's
report from going on for an hour and dragging things out too long. Most
meetings will probably last between one and two hours.
All members should agree on;
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The
days and time that we will meet (most investment clubs meet once each month),
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The
place for meetings,
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The
length of the meetings (most meetings last about two to three hours),
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The
organizational format that each meeting is going to take/conduct of business at
meetings.
Whereas it is important for the club to own its premises, this
will have diminishing, and even negative effects on the income statement, and
clubs cashlow, and ultimately, on the balance sheet, unless the office earn
money for itself. Consequently, clubs are advised to have as their office a
venue that can also be hired out, or as art of the investment club’s business
premise.
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Conduct of Business at Meetings
The affairs of the club should be
conducted in accordance with the letter and spirit of the constitution/agreement
laid down by members. In order to operate an investment club, business must be
conducted in an orderly fashion. The level of formality will vary based on the
club type (see club types).
Club members should communicate on a
regular basis. Part of the experience of starting an investment club is getting
together to enjoy similar interests and goals. The importance of good
communication between members of the group cannot be stressed enough. A typical
club will have informal channels of communication via mailing lists, twitter
accounts or message boards. In additional to the informal channels of
communication, an investment club must set up formal channels of communication
to conduct business. Typically, this is done with monthly meetings. Typical
meeting agendas include all the normal activities that the members would expect
in an organization with elected officials.
A
typical meeting agenda is as below.
1.
Welcome
Remarks: Welcoming of all members and visitors attending by the chairman of the
meeting; this may include prayer
2.
Preliminaries/Old
Business: Secretary reporting on apologies;
reading last meetings minutes and asking for ratification of the same; reporting
on any unfinished business from the previous meeting; reporting on assignments;
and reporting on all voted decisions from the previous meeting.
3.
Investment
Agenda: Net Asset Value (NAV) presentation by the finance secretary, indicating
what each club member is worth on paper; presentation of Available Funds to invest;
Voting to hold cash, sell current assets or invest in the chosen investment
options, specifying an exact amount to invest and strategy to execute that
investment.
4.
Learning
Agenda: Presentation of Current Research, by the members on their pre-assigned
reading; presentation of research by invited guest speakers; presentation of
lessons learnt on a previous site visit; or watching an educational
audio-visual presentation.
5.
Networking:
Presentation on networking events engaged in during the previous week;
discussion of possible networking events; or engagement in a networking event.
6.
Any Other
Business: Discussion of matters not indicated in the agenda, or matters for
tabling in the next meeting as agenda; or other issues not directly related to
education, learning or networking. This could also include options to change a
brokerage house, or discussions of counter party risk.
7.
Formal
Close of Meeting.
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Twende offices at Manda Hill, Plot 271/C.
……….
ZANAICA is promoted and hosted by Twende, an on-demand platform and Zambia’s
first superapp, that also offers motorcycles (bodabodas) and tricycles (tuktuks),
on lease to own, hire purchase model. Twende promotes investment clubs as an
initiative to promote savings and investment culture in Zambia. To get free
investment club training, do not hesitate to contact us on facebook at https://wa.me/+254103242604, or https://chat.whatsapp.com/HNosGG0OmdWHvXnFHVSLoh or email us at zanaica@twende.store or visit
Twende offices at Manda Hill, Plot 271/C.
……….
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Zambia, Investment Opportunity Zambia, High Returns, Low Risk, Twende,
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