WHY JOIN OR BE IN AN INVESTMENT CLUB IN ZAMBIA
There
are many reasons why it is personally beneficial for me (and mutually
beneficial for us as prospective members of a club) to join together in
starting an investment club. An investment club has
three main advantages, namely being a system for members to network, learn and earn.
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Networking
“do not seek to impress people who do not care about you after
5.00 pm”
-William Brayuhanga
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Two Is Greater Than One/The Law of
Averages
The
large number of individuals allows many different viewpoints, opinions, and mindsets
to work together to ensure that the best possible stocks are bought. The
strength of an investment club is based on the fact that more members mean more
money being invested and thus more profit being earned.
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Community, Togetherness/ Online Community
The
best thing about joining an investment club is typically the camaraderie of
members. Investments Club provides a great way to meet, network and make
valuable contacts, and share with investment professionals and people with
similar interests. The prestigious opportunity to network and an excellent
social calendar makes the club most exciting for people of all disciplines to
join. An Investments Club provides a great way to meet and network with many
members and investment professionals.
Through membership, individual investors connect in unique and powerful
ways. Members also get to do sleep-overs, house visits, family day’s outs and adventures
like mountain climbing, etc.
Further,
when members come together, they can then organize and give back to the
community through charity visits, helping the sick and orphaned, and cleaning
the environment.
In
addition, networking also enhances the ‘bonding
factor’, which in itself acts as a
cure for unethical behaviours since members become very closely intertwined,
even with members’ families, and further, leads to natural incentive to save
and participate in club activities.
As
part of an online community,
members can learn and share through a variety of discussion forums, blogs and
live online events. In addition to holding (in) formal get together, it is also
practical to incorporate an online presence into an investment club. Often busy
schedules and the inconvenience of meeting in a physical location can make
connecting and conducting meetings in cyberspace more practical. Thus, given
the hyper-speed pace of the marketplace, and the impact that rapid
decision-making can have on portfolio performance, adding online club
capability to any investment club is an important requirement for efficiently
managing an investment portfolio in today’s digital economy.
Using
apps like what’s up, or facebook, and twitter, investment club members can
create instant communication channels, and active communities.
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Business/Professional Networking
Since the members of an investment club have their own careers,
professions and individual skill sets which might be useful for other
individual members, or even the club, the investment club offers the club
members a change to,
‘do business with each other’
And further chance to,
‘do business with the club.’
The investment should actively seek to give business to members,
and not outsiders.
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Similar Interests
Members
of an investment club enjoy getting together on a regular basis to discuss the
investment market and to learn more about a subject that greatly interests
them. For the added excitement of making an informed judgment to invest
in, and share in someone else's dream and see it unfold. Enjoying a commonality of interest with
other investors can be a lot of fun.
These clubs are open places for us to meet, socialize and talk with
other like-minded investors. Surrounding myself with like minds and like
interests is probably the most effective way to learn, especially concerning a
topic as risky and complicated as investing in stocks. Likewise, those around
me may also learn a thing or two from me and my experiences, whether in the
stock market or not. Groups often limit membership,
if for no other reason than to maintain a desired culture. Intimacy and
frankness of discussion may be overriding goals that naturally limit the number
of members. On the other hand, many groups find advantages in large numbers
because of the resources available through better potential deal flow, the
opportunity to make larger deals, and a greater pool of resources in membership
skills and background.
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Regular Meetings
As a
member of an investment club, I meet regularly with friends and colleagues,
research, share, laugh, socialize, and make money. What could be more fun? ‘What could be better than making money
while I am having a good time?’ Investment clubs are a great way to learn
and apply investing skills in a friendly, pressure-free atmosphere. Investment
clubs enable
individual investors to come together in small
groups to learn, develop
investing skills, and help each other become more successful investors. Regular
meetings helps the members to ensure that sufficient progress is being made
towards achieving the club's investment goals and objectives, share their views
and enjoy social interaction between like-minded individuals.
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Events Participation
Investment
clubs also participate in events such as Stock Market Challenge and Traders
Expo. The investment clubs
further can host numerous exclusive events and presentations. These events are
often run together with sponsors and partners, and provide fantastic social and
networking opportunities for all members. Events are normally held in some of
the best hotels, bars and restaurants. As participants in local and regional events sponsored by investing chapters, members
enjoy valuable opportunities to share ideas and information with investors and
fellow members. Joining an investment club is certainly a fun and educational experience! The most important thing to
remember when starting a club is to have fun. Investment clubs organize
social events for members to take part in. The events may include voluntary
travel to impact other’s lives. The events can also be organized in partnership
with other societies, or associations. Clubs are about
socializing and sharing an interest with friends and associates.
Investment club members should aim to offer hundreds of hours of volunteerism
and community involvement. It is great to
give. Such events also include charity work. Indeed, just like a lake that
receives water but does not have outlets soon kills all living organisms inside
it, so does a club that receives returns, but does not donate in generosity. We
need to give, mighty companies give mightily, and billionaires give billions.
We need to give according to our purse.
‘we
need to give.’
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Investment /Strategic Partners
Investment partners are
usually committed
to actively supporting the club’s mission of investor education and
empowerment. These partners include listed companies, stock brokers, capital
markets authority, stock exchange and investment banks, to name but a few.
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Internships and Access to Career
Investments
Clubs that are aggressive and ambitious in seeking partnerships can offer
internships and provide members with access to career opportunities in the
(financial) investment industry and the opportunity to attend events.
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Celebrating Social Events
The club should also have a fund to
contribute to birthdays, graduations, weddings, and other events of members,
and members immediate families. Birthdays can be lumped up in monthly, or
quarterly events. The club should have a set amount to spend in such events.
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Learning
“we live our
knowledge”
-Rwoth Ramogi
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Combined Investment Knowledge
More members mean more ideas!
This is the most powerful statement of all, and cannot be undervalued. If
I want to learn more about investing, then an investment club is for me,
definitely. One of the goals and benefits of investment clubs is the
opportunity to learn. While the primary motivation is to make the most
money possible, investment clubs are also a great way for investors to share
ideas and learn about the market. When I work with
a group of people who have a similar interest in making money and becoming
rich, I will be able to have a huge amount of combined knowledge working in my
favor. Even those complete newcomers to the stock market will have a valued
opinion and pieces of information that when added all together equals a lot of
thinking power.
I will
be able to make decisions about where I am going to invest my money rationally
and intelligently since the choice is of the majority and is based on a great
deal of thought and information; an informed choice. Whether or not I know or
possess any knowledge on the stock market and the way financial institutions
and businesses work or how to invest on an individual basis or have a personal
portfolio of my very own; I need to keep an open mind and be willing to learn
and to adapt to investing on the basis of a partnership. Larger amounts of
money, a democratic vote on individual stocks, meticulous club record-keeping,
and a host of other elements are included in the process. A willingness to
adapt and to actually deal professionally with the club as a whole will
definitely work in my favor.
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Application of Knowledge
Investment
clubs are a terrific way to learn because the focus is on both learning and
implementing. The Club facilitates an environment where members can develop a better understanding of investment
strategies while interacting with professionals in the investment community.
Ideally, an investment club has an education
officer who invites guest speakers, maintains the library and organizes
field trips. An education program offers proven strategies to help
investors achieve their long-term financial goals and secure a better financial
future for themselves and their families. Speakers at each club
meetings discuss various topics that include Current Market Conditions,
Market Forecasts, Investing Strategies, Investment Analysis, Career Advice, detailed
study of the mechanisms associated with the many types of investment, portfolio
theory and management, knowledge of the global economy and Guidance.
‘The best investors are the best
informed,’ says Kenneth Janke, chairman of Better Investing
(formerly the National Association of Investors Corp.). Investment clubs will
seek the advice from financial advisers, but as the clubs gain more knowledge,
the need for advisers lessens. The best clubs use technology to acquire more
information about the market. Investment clubs also leverage the group
knowledge.
All members may not be financially able or be business savvy to complete a deal, but leveraging the best everyone can offer in experience, passion and commitment will propel
the group to new heights. Knowledge is the great equalizer. Being
a member of a club is enlightening and an excellent learning experience.
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Learning about Policy
Environment
Investment clubs invest in the vehicles, which are responsive, and
affected by policy environment. For instance, an increase in central bank
interest rates (lending rate) as a tool of monetary policy, will lead to banks
increasing their own interest rates, and ultimately, will move returns from
equity investments to the debt investments. Further, inflation leads to
depreciating local currency, which affects the value of shares owned in foreign
countries/foreign currencies, and also affects Forex investments, for instance,
bank accounts held in foreign currency. Consequently, our investment club must put
as much effort into researching and learning rather than just simply buying.
Experts in the field can serve as guest speakers for the group, and there may
be required reading of books and other publications before each meeting.
Purchasing this knowledge is more cost-effective than if an individual were to
just do it alone. With it, the members are empowered to
make winning investment decisions. In essence, investment clubs should not be a
Sunday/Monthly event, but rather, an active process. Education is done through:
€ Local,
chapter-sponsored seminars, workshops and investor fairs that teach the investing system, using
a hands-on, collaborative approach.
€ National and
regional events that give the
members access to market intelligence, financial insights and actionable ideas
direct from leading investing experts.
€ Online
investing courses, webinars and stock studies that allow members to learn at their own pace, when and where they wish.
€ Books and
newsletters that help members apply investing principles and
investing best-practices.
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Learning
to Save
Investments Club members learn how to
save for investment purposes. Investment
clubs offer the structure and support that many people need to get started
saving and investing, and clubs make it possible to get into the market without
a big initial investment, which is yet another incentive for new
investors. The key to investing is savings.
An investments club encourages the
members to invest, through the monthly contribution to the investments club
account, hence acting as automatic savings. Such an effective savings strategy
coupled with a smart investing strategy will help members to meet their financial
goals. Every dollar saved helps members to control their current consumption and
build on their wealth.
Further, through the power of annual
compounding, it increases the size of the nest egg I will have for retirement.
Saving money is one of the necessary requirements of building wealth. No
matter how much I make, my income must exceed my expenses if I am ever to build
wealth. In his masterpiece, The
Richest Man in Babylon, George Clason, the soldier, businessman and writer,
advises income earners thus; ‘pay
yourself first.’
In addition, another thing about Investment Club is that I cannot get my money
out if I need it. If I were to invest in lending club, I would have to wait for
all the payments to come in. There is no way to speed up the process, even with
a penalty. So I am locking my money into this investment vehicle with no way to
change investment strategies or withdraw funds.
To save is to pay myself. Benjamin
Franklin, one of the Founding Fathers of the United States and a noted
polymath, a leading author and printer, satirist, political theorist,
politician, scientist, inventor, civic activist, statesman, soldier, and diplomat
was right, ‘A penny saved is a penny
earned.’
This is one
area where the Universal Law of Accumulation works. Every large fortune is an
accumulation of hundreds and thousands of small amounts of money. When I begin
to save money, it sets up a force field of energy and it triggers the Universal
Law of attraction. Money always works hard to make more money. Each dollar is a
great employee, willing to make even more dollars and more employees. As a
result I begin to attract to me even more bits of money to add to my savings.
After saving, I will invest my savings. Paul Clitheroe, the Australian television presenter,
financial analyst and financial advisor, was quoted saying, ‘There are plenty of ways to get ahead. The
first is so basic I'm almost embarrassed to say it: spend less than you earn.’
A good investment club will help me well into my retirement and a bad one will
have me still working through it.
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Key Topics
Some key areas of learning are:
$ Islamic Finance And Islamic
Investment Clubs & Saccos
$ Risk Management &
Portfolio Diversification
$ Membership Retention &
Retention
$ Tax & Regulatory Issues
(Collective Investment Schemes-saccos, investment clubs, PE funds, etc)
$ Leadership & Succession
Planning
$ Strategic Planning
$ ICT Integration for
Investment Clubs (Software)
$ Micro Investment in Micro
Enterprises/ Local PE
$ Joint Investments
$ Fixed Income Securities
Investment
$ Financial Reporting for
Investment Clubs
$ Stock Market Investment
$
Earning
“Pooling of capital is one thing we must do to excite the growth
function.”
-Joseph Kitamirike, CEO, Uganda
Securities Exchange)
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Income Generation
When a group of people make investment
decisions after a series of discussions and debates, the potential for profit
is greater than when individuals make their own decisions about where and how
to invest their money. Thanks to the pooling of savings, I can
access investment opportunities which I cannot take advantage of as an
individual. To have the opportunity for better returns than bank on annuity
savings with similar liquidity of my investment. Further, when my club makes a profit, no
matter how small, the amount must be distributed throughout the investment club
membership. Further, an investment club helps the members to
maximize returns as it creates a tool which can help my money work hard for me
and show better returns than if it were simply left on deposit. It hence leads
to Personal Branding through increasing net worth, creating a long-term savings
plan for me, the kick of feeling the pure excitement when things go well.
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Low Overhead Costs
Group investments lower the overhead cost. For example if a team contains 100 members, and each trade costs 5
dollars to execute, then an equity trade of $5000 would have an overhead of
0.1% or 1/10 of a percent. Whereas if you were trying to invest $50 dollars
per month on our own, that same transaction would have a 10% overhead.
All operating costs in an investment club are transparent and
open. We do not have to worry about expenses. The management cost will be
almost as low as possible because there will be no paid stock analysts or some Mutual Fund Manager getting rich on our dime.
The only costs incurred will be the legal
fees to set up the club, the accounting fees, the transaction fees, and any
applicable service fees, including minimal fees for snacks during
meetings. The only other expense is the broker charges/commissions for
selling. This should keep the entire overhead below 1%. Members decide on a
monthly subscription to raise cash to buy shares. With some clubs it is as low as USD10 per
member, but more typically the subscription is around £30-£50.
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Low Personal Risk / Two Are Stronger than
One
Even though the money that my club has to invest can be quite large, my
own personal contribution can be very minimal. This way I am not risking a lot
of my money while I learn how the stock market works. I can still make some
great investments but my loss factor will be manageable.
One of the most valuable ongoing benefits of an investment club,
especially for beginner investors, is the ability to have investment decisions
analyzed by different points of view. A group can be capable of more output
than any individual within the group; than me. The way the club works is that
each month, 10 members or so will do research and present their proposals to
the other members. Then the entire collective club will vote on the
proposals. The winning proposal will be followed. This is strength
through numbers: the more members we have with spare cash, the more our buying
power increases or the more diverse our portfolio grows. The administrative
work associated with running the club can also be shared. Lyndon Baines Johnson, the 36th
President of the United States, often referred to as LBJ, was quoted as saying, ‘There
is no problem that we cannot solve together, and very few that we can solve
alone by ourselves’.
Team support is very important in achieving our dreams. When two people
walk together, they can go a long while. When
two people sleep together, they give each other warmth,’ the Holy Bible
says. The Swedes believe that ‘Shared joy
is a double joy; shared sorrow is half a sorrow.’
An investment club is like a dream, with every member a part of the
dream. From time immemorial, the Turks
have believed, ‘no road is long with good
company’. The dream team will fight for me when I am down and low. The team
will make sure I do not remain down when I fall. The dream team is premised on
the ‘mastermind principle’; which is
soundly described in the classic Think and Grow Rich by Napoleon Hill that
‘two minds are better than one’. A Luo proverb says, ‘Alone a youth runs fast, with an elder slow, but together they go far.’
It is possible for a group of two or more people to cooperate in such a way
that the productivity of each enhances the productivity of the other. The Holy
Bible is right, ‘A rope of two cords is
stronger than that of one cord. In the team I will find security of thought
and action. The Holy Quran teaches that ‘there
is safety in the multitude of advisors.’ The strength of an investment club
is based on the fact that more members mean more money being invested and thus
more profit being earned.
Also, the large number of individuals allows many different viewpoints,
opinions, and mindsets to work together to ensure that the best possible stocks
are bought. Many people are terrified of taking their first investing steps.
But investment clubs make this a relatively painless experience. Members cough
up modest sums and invest carefully together after deliberating over the pros
and cons of any action.
Further, when we come together to form a club, the worst case scenario
of solvency is helped by the fact that I am not the only one suffering in such
a situation. The more people involved in an investment equates to more people
who are harmed if such an investment fails. This almost automatically ensures
that more people are concerned about the failure of my venture. Another added
benefit is the fact that I will be drawing from a larger and arguably more
informed group of people each time I consider choosing one stock or another.
This is the reason that many investment clubs will cherry-pick their members;
having a diverse, unique, and eclectic group of individuals will help to ensure
that more viewpoints are presented and thus covered when making financial
agreements. Further, different membership professions will cure ‘the curse of group think’.
It must be stated, however, that an investment club partnership
agreement also may potentially put me at risk of the varying ideas and
attitudes of the people that I am going into business with. If I have wildly
differing opinions on, say, mortgages or mutual funds I can be sure that such
disagreements will arise fully when I try to navigate the tricky waters of the
stock market. The benefits of joining an investment club partnership
agreement will make me a party to the whims of others so it is necessary to be
aware of this before I sign my future away for the short term. On the other
hand, I gain practical wisdom about the stock market from whomever I am joining
up with so I may in fact be benefiting from splitting my losses and even the
most frugal of financial advisers will inform me that such an idea is nothing
but a good one.
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Tax Deductions for Expenses
Because
each club will be set up as a corporate entity, that is a corporation or
limited liability company, or registered partnership, we will be entitled to
use the overhead expenses as tax deductions on our personal income tax (where
applicable), and hence pay less tax, an take home more returns legally.
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Invest Regularly/Dollar Cost Averaging
Investment
clubs have the ability to invest in the stock market even when the market is
dropping or is slow. Because the money is spread out among a group of members
the room for huge personal loss does not exist. They take advantage of dollar cost averaging.
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Reinvest
Since
most members are part of an investment club for fun, and to learn more about
the stock market, there will be more room for re-investing the gains and
dividends that are earned from successful investments rather than spend the
capital gains as income. When I invest on my own I will not be as willing to
part with earned investment money and reinvest everything that I gain.
DIVIDEND: A
distribution of the earnings of a corporation Dividends may be in the form of
cash, stock or property (other securities owned by the corporation). A dividend
can only be paid by declaration of the board of directors of the corporation.
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Portfolio Diversification
When I
am investing with a group of people I can spread out my investments and
diversify my investments and not limit myself to just one or two market
choices. The golden rule of successful investment is to diversify
my portfolio. Diversification is a fundamental aspect of financial
planning. In a nutshell, it is the old adage to not put all my eggs in one basket. If I have all my eggs in
one basket and something happens to the basket then I am in big trouble.
But instead, let us say I keep some of my eggs in the refrigerator. If I
spread my investments across various types of assets and markets, I will reduce
the risk of catastrophic financial losses. Then if something happens to the
eggs in the basket I still have the ones in the refrigerator. Different
securities perform differently at any point in time, so with a mix of asset
types, my entire portfolio does not suffer the impact of a decline of any one
security. When my stocks go down, I may still have the stability of the bonds
in my portfolio. Diversifying investments in a portfolio helps to manage risk.
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DIVERSIFICATION: The
strategy of investing in different asset classes and among the securities of
many issuers in an attempt to lower overall investment risk.
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ASSET:
Any item of value that an individual or a corporation owns.
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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