Investment clubs

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4. Deciding on your aims

It's important to decide what you want out of an investment club, and to make sure that whichever club you join has the same priorities.

• A precondition of any successful club is that its members have the same objectives
• Clubs whose members want different things become dysfunctional very quickly

So iron out the wrinkles before you join a club. If you are about to join a club that already exists, ask them to articulate their objectives. If you are setting up your own club, make sure that you put your objectives down in writing and that every new recruit agrees fully with them.

Below are some examples of the different objectives that a club may have.

• Aiming to learn
  Some people join an investment club to learn about the stock market. They learn by discussing investment strategies and which shares to buy with their fellow members. They tend to invest only a small, regular sum of money. From what they learn, they then build their own portfolio of shares outside the club.
• Aiming to speculate
  Other people join an investment club with the hope of making large gains in their capital quickly. To do this members choose a very speculative portfolio. They keep their regular subscription fairly low, and withdraw money from the club if it makes a significant profit on one or more shares.
• Aiming to exploit expert knowledge
  People who share a common expertise, such as colleagues in an industry, join together to pool that knowledge and invest only in that industry. They may well put a significant part of their savings into the club, relying on their specialist knowledge to avoid major capital loss. From time to time they may withdraw all the club's money from the stock market when they expect the sector to do badly, and go back in when they anticipate an upturn.
• Aiming to save
  Some people use an investment club as a long term savings vehicle. People in such a club put a lot of emphasis on capital protection. They aim to do better than the average unit trust because the only charges paid by the club are the costs of buying and selling shares.

1. What is an investment club? 2. A simple explanation of how it works 3. Why join an investment club? 4. Deciding on your aims 5. Joining an existing club 6. Preparing to launch a new investment club 7. The draft constitution and rules 8. Drafting the investment strategy 9. Example of an investment strategy 10. Attracting members to your club 11. Preparing for the inaugural meeting 12. The inaugural meeting - appointment of officers 13. The inaugural meeting - key decisions 14. Things to do after the inaugural meeting 15. Starting the processes 16. Running the first meeting 17. Regular meetings - the key to success 18. The cash account 19. The capital account 20. The asset register 21. The annual general meeting 22. Tax 23. Performance measurement 24. Dealing with a member leaving 25. Conclusion

• ProShare Investment Clubs Looseleaf Manual
• Fool's Guide to Investment Clubs