JOINING AN INVESTMENT CLUB in ZAMBIA-WHAT TO CONSIDER

 

Since most investment clubs are already well established, it is highly ideal to find and join one that can yield me the most benefits that are actually useful to me. If I am considering joining an investment club, then I must consider the following issues:

How Is It Organized/Administration?

$       What Is Its Mission, Objective and Goal?

The mission of an investment club is to provide a program of sound investment information, networking, education, and support that helps create successful lifetime investors and financially free individuals. The objective of the investment club is to pool money to invest in another venture to make more money. The goals of an investment club are to educate members about the world of finance; give them real-life experience in trading stocks, provide opportunities to network with some of the most prestigious firms, and help them pursue careers in the financial services industry.

$       Is It a Member of a Club Association?

 In most developed countries, and other progressive developing countries, there are national investment clubs associations. For instance, in the U.S., there is BetterInvesting, the National Association of Investors Corporation; whereas in Kenya there is the Kenya Association of Investment Groups, and Uganda has the National Association of Investment Clubs. These offer some excellent support and information for people wishing to join or start their own investment clubs. They also provides excellent tools, including newsletters, and subsidized services offered by their partners, to the clubs. There are also various organizations that support investment clubs, offering financial literacy and relate services, including capital market authorities in various countries, nongovernmental organizations, and national investment clubs/groups associations.

These associations offer amongst other services: capacity building; lobbying with government and other stakeholders; dispute resolution; networking; meeting rooms; research and dissemination of research reports; and subsidized services.

$       Is It Legal?

Many investment clubs are in fact modern day scams that only exist for the sheer pleasure of separating me from my hard earned money.  I will need to determine whether the club is a duly registered association, a corporation, cooperative or a partnership.

I should read the policies, rules, regulations, club's charter to its bylaws on duties and rights.

 

Is It Networking/Meeting?

Further, I should confirm is the club meets for social events, and with what frequency such events occur. Part of the networking is done through learning events, either through guest speakers, research presentation by members, or through site visits to various investment organizations, including companies or government offices. Hence I should confirm that there are networking events, fun events, and learning events, before I join the club.  

$       Does it Hold Meetings?

An investment club is a group of people who meet together to learn about investment strategies and concepts, to network, and to invest. The club I wish to join must have a record of meeting, indicating the research of members, the decisions taken, the networking functions attended and even the books read.

One of the major challenges to investment clubs is the lack of attendance of meetings, and this can be cured by the leaders engaging in activities that are inspiring, including inviting key guest speakers through the national investment clubs association or other partnerships, as well as investing in a big project. These two activities will pique the interest of members, rejuvenate them, and encourage attendance and participation.

Further, any investment club worth their investments should be able to afford a get-together with friends of members and networking events.

$       Investment Club Management Software (Leveraging ICT)

Finally, investment club accounting software can also add value to my group instead of being just a tool in the background that supports operations. The best investment club software can generate my organization’s official website that features a community forum, amongst other applications for club administration, communications, and other activities. As technology continues to break barriers, it would be no surprise if all investment clubs in the future would opt for online meetings with partners we have never met. And with the right investment club software, the club will be ready for whatever is in store for the industry.

 

 

Is It Earning/Investing?

$       Are They Making Profits?

The business of business is business. The purpose of clubs is to make money, not welfare. I will want to be aware of the financial history of the group that I am considering becoming a part of. Any kind of investment club is obliged to have a long and healthy paper trail of tax and Social Security forms behind it and this is where I can truly distinguish the big ballers from the small league players. If the group that I am interested in is acting a bit fuzzy when it comes to records then I can be reasonably sure that something is not right. It is in these instances that the best option is to simply run away. An ideal private investment club is one that has returns that are both real and able to be boasted about. An investment club that does not have anything to brag about must be approached with caution. If the club has nothing of the sort then I can be reasonably confident that they are small-time or possibly even dishonest.  Specifically, I will ask to see the following:

£       Unit Price: Before I join the club, I should ask to see the performance on Unit Price, and there must be a growth in value of unit price over time, not necessarily year by year. Unit Price is the total assets divided by total shares, so that if the asset base increases, the unit price increases, and if asset base falls, the unit price falls. In most clubs, members purchase units, rather than just having shares.

£       Asset Base: I will also ask to see the asset base, which should be growing. This is the investments clubs balance sheet, and it should be growing, if not doubling by year. The asset base should be well diversified in the various investment vehicles that is, personal branding; financial instruments; and alternative investment products. (for a detailed analysis of the various investment vehicles I will read Invest – Rwoth Ramogi’s Guide to Financial Instruments & Alternative Investment Products)

£       Member Investments: I should ask to see the member investments, that is, savings, and whether they increase by year, or it is the same amount. An increase in members savings/investments, will lead to an increase in members earnings, since money earns money, and more money earns more money.

£       Return on Investments: I will also ask to see the return on investments (ROI), over a three, or five year time, not necessarily over one year, and this will determine the growth of the club. This is captured on the profit and loss (P&L) (income statement). The return on investment should factor, in particular, cost of capital, inflation, taxes, and operational expenses.

$       Does It Practice the Fundamental Principles of Investing?

Before I join an investment club, I should confirm that it is practicing The Rwoth Ramogi 9, i.e., The Nine Fundamental Principles of Investing as stipulated in this guide, which when followed, will lead to successful investing and becoming rich and financially independent.  The principles are:

1.     Goal Setting: This involves painting the picture of financial freedom that we want to have, and writing what we must do to get there.

2.     Leveraging: The club should rely on Other People’s Money (OPM), to leverage, and achieve a much larger investment portfolio without diluting shareholding or committing additional personal capital.

3.     Saving-2-Invest: The club members, or investors, and the club, should accumulate money through savings in order to invest.

4.     Long-Term Investing-The club should have a three-year plus investment outlook.

5.     Portfolio Diversification-The club should diversify its portfolio

6.     Dollar Cost Averaging-The club should be investing regularly.

7.     Risk-Tolerance- The clubs investment decisions should be alive to the risks.

8.     Knowledge-Based Investing-The club members must have a continuous learning culture

9.     Compounding & Re-Investing- The club should compound its investments and earnings.

 

Is It Learning/Education?

Education is an important component of an investment club. There must be continuous development of members’ skills and knowledge, and this is achieved through education programs, including but not limited to field visits and trips; guest speakers; personal reading; assigned reading and research, and edutainment.

$       Does It Have Reading Culture?

Before I join a club, I need to ask about their reading culture. How many books they have read; how many speakers they have invited, etc.  It is education that protects the club from erroneous decisions, reducing risk and helping in informed investing.

$       Are Members Becoming Better?

An investment club depend on members earning from elsewhere to be invested in the club, and or by the club. Consequently, if members do not earn from other sources, they will not invest with the club. Subsequently, the club should support members to earn more in their respective sources of income, and people earn more money when they become more valuable to the market place. As such, the investment club should help members to be more valuable by conducting trainings to upskill the members.

As Rwoth Ramogi writes in his classical career book, Talanta - Rwoth Ramogi’s Guide to Identifying, Developing & Selling My Talent & Career Skills, Every employer, whether in the church or mosque; in the military or religion; in school or workplace; in the public or private sphere; wants me to have certain qualities which will make the employee useful to the workplace. These qualities are seven in number;

1)    Job skill

2)    effective communication (public speaking, written and oral expression)

3)    teamwork & interpersonal skills;

4)    leadership & management skills;

5)    attitude skills (personal qualities);

6)    financial literacy (acquiring, managing & using money) and

7)    logic (intelligence). 

Whereas the investment club might not be training on job skills (unless the club is purely a professional member club, e.g., club of lawyers, or club of accountants, or club of doctors), the other areas are important training areas, and being part of an investment clubs association helps be getting free, or low costs trainers. Having diversified member experience also helps as expert members can train fellow members in their areas of expertise.