Investment clubs

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8. Drafting the investment strategy

Once you, and at least one other person, have agreed on the overall investment strategy you need to produce a draft of it. The first thing is to settle the level of risk that the club will take.

1. Think about risk

   - Peoples' view of risk is very individual. Some people regard an investment in anything other than a blue chip company with a reliable dividend record as being too high a risk. Others are willing to invest in a start up company with no track record of success.

   - Attitude to risk tends to change according to age. Younger investors can afford to take more risk, and conventional wisdom is that they should do so in order to have a chance of serious capital growth. Investors at retirement age, equally sensibly, tend to be more risk-averse and to look for income-producing investments.

   - Look at risk in combination with return. If you are looking for short term gain, you will probably choose a higher risk portfolio than if you are looking at the club as a long term savings vehicle.

2. Understand the risk profiles of different investments

   You can put different types of investment into a list from what you regard as the highest risk to the lowest. Here is an example of such a list:

   Investment opportunities in a sensible order of risk from high to low

   - Options and warrants
   - Shares bought for their recovery potential
   - Shares bought for growth potential
   - Overseas shares in individual companies
   - Investment trusts and unit trusts in overseas companies
   - UK companies in the FTSE Mid 250
   - UK companies in the FTSE 100
   

3. Choosing your risk strategy - the investment triangle

   To choose your investment strategy think about a triangle

   The investment triangle

   
   
   

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
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