Why investment clubs can fail

It is rare that an investment club is a bad experience. Most of them are fun and friendly places to learn. Investment

clubs that do fail, generally fail within their first year or so of operation. This comes down to the same problems, time

and time again.

If your new investment club can avoid these perils, then your chances of success are much

better:

• Same investment philosophy – Make sure that all members of your investment club have the same

investment philosophy. If some members are interested in ‘playing the market’ rather than applying a more

studied, long-term approach, the conflict can tear the investment club apart. The recommended course of

action is for your investment club to set your investment philosophy at the start, and to be disciplined enough

to carry out your strategy consistently.

• Sufficient research – You must only buy shares after doing sufficient research. We recommend that you use

a Share Selection Checklist (SSC) as the main tool for choosing shares. This checklist must be presented for

each share that is considered for investment. Preferably, each investment club member should have a copy of

the checklist to reference during the discussion.

• Attendance and participation - All investment club members must carry their weight, and respect the club

as a business. Your club should set minimum attendance and investment requirements for members. Failing to

show up for meetings or not paying on time must be considered a major problem. In many cases, investment

clubs are too eager to accept a new member into the club. We suggest that a prospective member should first

attend a few monthly meetings as a visitor before being invited to join.

• Accounting issues – Finally, you must commit to flawless record-keeping and sustainable accounting policies.

Even though investment clubs believe that they are keeping things simple by trying to use the ‘every member

has an equal share system’, this becomes problematic when a member needs to make a partial withdrawal for

an emergency. It also can be very difficult to find new members, since the amount that must be invested to

have an equal share keeps increasing. At PSG Wealth, we recommend using unit values.

Summary

Investment clubs are great vehicles for the Average Joe to get involved in the share market. Although there are some challenges,

what may seem like a daunting task at the outset is broken down into more manageable chunks.  

…………..

ZANAICA is promoted and hosted by Twende, 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 https://wa.me/+260978240809, or https://wa.me/+260975386685 , or https://chat.whatsapp.com/ICzHvmEPFYn7HpwrSmEecB or email us at twende.store@gmail.com, or info@twende.store