If share trading on your own doesn’t appeal, an investment club for fun and profit might – and you can start with as little as $200.
If you want to learn about investing on the stock market without putting serious money at stake, the answer for many people, particularly women, is a share trading investment club. Sixty-something Mim Webb is a fan. Four years ago she helped found Portia Investments, a 15-member club based in Melbourne, Florida.
Having retired from teaching, she finally had the time and money to indulge her fascination with investing. But she quickly discovered that solitary investing wasn’t for her. “I found it a very lonely sort of thing to do on your own,” says Webb.
Inspired by a book about investment clubs, she went in search of others with similar interests and a couple of months later Portia (Pooling Our Resources To Increase Assets) Investments was born.
The share trading club has been through its share of ups and downs in the past four years, but the members’ enthusiasm shows no sign of flagging. It now looks as though an original five-year commitment to the club will stretch into 10. “It’s absolutely fantastic the way it’s come together and held together,” says Webb.
While long-lasting friendships are often forged as participants thrash out their investment ideas, the share trading clubs themselves are not always so long-lived.
Susan Jackson, executive director of the Women’s Financial Network, produces a kit containing sample agendas and partnership agreements and excellent pointers about how to make a club work. WFN was established in 1995 so women could access information, professional advice and related services.
Jackson says the popularity of share trading clubs often mirrors the stock market cycle, with numbers proliferating in good times and dwindling during downturns. Clubs can falter after a run of bad investment decisions or when members move away or do not pull their weight.
So how do you build an investment share trading club with staying power? Jackson says choosing the right members is vital to the long-term health of investment clubs.
“It’s really important to get the selection of members right from the start, because the angst and unrest and damage that can be done by having the wrong people can destroy a club,” she says.
Jackson regularly receives crisis calls from clubs and mostly the conversation revolves around problems with members. “The meetings are turning into cat fights or no-one can agree on things,” she says. Often differing expectations or objectives are at the heart of it all.
One share trading club split into warring factions, with some members deadly serious about the business of investing and others just wanting a drink and a chat. To avoid being tripped up by people problems,Jackson suggests having several “pre-club” meetings where potential members discuss why they want to join, how much they are prepared to contribute, how often they want to meet, and what skills they could bring to the club.
Having their roots in another group has helped some of America’s longer-standing clubs to thrive. Sheba Investment Network was formed by women who met at a book club and many of the original Portia Investments members met through Soroptimists International, a professional women’s group.
“I have a feeling that is one of the reasons for our success,” says Webb. “Soroptimists are used to working together; they are used to listening to other people and respecting other people’s views.” One American club fell on rocky ground after its treasurer abused the trust placed in her and took off with a chunk of its money.
This is an extreme example, but it shows clubs need to be prepared to deal with a range of dilemmas. Jackson suggests that writing a partnership agreement at the outset makes it easier to deal with potentially divisive situations down the track. The document can be used to detail how the club will deal with members who consistently fail to attend meetings or make contributions.
Sometimes it’s not just members flouting the rules that brings a club undone, it is also not pulling their weight. To prevent uneven workloads some share trading clubs rotate the various roles. Others simply accept there are always going to be some with more time and energy to devote to the club.
As with any relationship it can be necessary to review the way the club operates. A four-member share trading club chugging along quite happily since 1997 decided to call it quits last year after a change in one member’s circumstances.
Jackson says many of the healthier clubs keep waiting lists to help them survive periods when members exit. Often they find bringing in “fresh blood” also gives the club a boost. Portia Investments lost a few members when one moved to New York for work, another to Los Angeles and another was ill. After three years they dissolved their original partnership and reformed with three new people, a development Webb thought might disturb the club’s balance.
Happily she reports: “In fact it was fantastic because two of those people have become very, very active. They are younger and more vigorous and they are good fun.” Emily Chantiri, an original member of the Sheba Investment Network, says that even small changes can help a club last.
Their meetings have been much more productive since they agreed a year ago to leave eating and drinking until after their discussion. “We found if there were drinks on the table, even cheese and nibbles, that really swayed [people’s attention] from the meetings,” she says.
Some share trading clubs take steps to keep the magic alive. The Portia Investments crew throws in an extra $30 each at Christmas and invests it in a fun stock. Lynn McDonough, a founder of the Watertower Investment Group, advocates getting in an occasional outside speaker to provide a fresh perspective. Most successful clubs have rules about when to cut their losses and they don’t beat themselves up about making less than perfect investment decisions.
Having been through seven years together, the Sheba women have seen the share market at its best and its worst. Even though most members were inexperienced investors, Chantiri says they have learned to take the down times in their stride: “Even the wealthiest people make mistakes, but they just learn from it and continue.” What keeps the share trading club going is that the members still find it fun and stimulating. “We still enjoy it,” says Chantiri.
Share Trading Clubs :: Play By The Rules
You set them to suit yourselves
The beauty of investment clubs is that you set the rules to suit yourselves. Portia Investments members made an initial contribution of $200 each and set monthly contributions at $50. Once a year they throw in an extra $30 to invest in something “for fun”.
Jackson says one share trading club gets members to write down what they can afford each month and they go with the lowest amount nominated.
Investment decisions are put to the vote and good clubs set rules about when to exit a stock. The Sheba Investment Network sells when a share falls more than 20%.
Decisions should be made upfront about how to deal with “delinquent” members and those wanting to leave. The Portia women have the option of charging interest when someone is three months in arrears, and recently tightened rules on attendance when they failed to get a quorum.
It started at a book club How one thing led to another & a new club was born…
A chance conversation at a book club about seven years ago gave rise to the Sheba Investment Network. “We were joking about having a meeting in New Orleans because we’d just read a book that was set in New Orleans,” says Emily Chantiri, one of the founding members of the club.
It was then she discovered she was the only one in the group investing. Seven years later, five of them are still getting together regularly to discuss stocks and their latest investment ideas Emily admits that occasionally they become a bit complacent and buy into a share without doing their homework. “We’ve had to pick ourselves up on that.” But overall their interest has paid off.
Their pooled investment portfolio is worth about $8000 each and most members now have their own share portfolios. At year five the group went through a period of soul-searching. Some members were approaching retirement age and beginning to think differently about investment to the younger members.
The women decided it was time to spend some of their “kitty” on a weekend away to discuss the future of the club. The upshot? “We all resolved to stay,” says Emily. And she adds: “We still enjoy it.”