An investment club is a group of individuals who meet for the purpose of pooling money and investing. The conventional way of managing investment clubs is that members typically meet on a periodic basis to make investment decisions. There are clear benefits to the discipline and decision-making typical of investment clubs.
By maintaining a strict regimen of regular meetings, investment clubs force individual investors to adopt an active investment style, in which portfolio review is ongoing and investment decisions – whether to buy, sell or hold – are constantly made. Furthermore, the decision-making power of the investment club resides in its democracy. Each member brings his or her own education, experience and skills to the group, all of which are used to their fullest when evaluating and debating a decision. The power of the investment club comes from the collective talents of numerous individual members.
Investments clubs can be compared to a mutual fund, which are investment securities that enable investors to pool their money together into one professionally managed investment. However, with investment clubs, the members of the club invest their own money and act as the management team. They are both manager and investor at the same time. You can think of an investment club as a small-scale mutual fund where decisions are made by a committee of non-professionals. Best of all, an investment club avoids the often burdensome management fees that all mutual funds levy on their unit holders – fees that can have a significant impact on the overall return provided by mutual funds.
The benefits of an investment club come with a major requirement: the returns (or losses) that the club realizes entirely depend on club members and their abilities to choose the right investments for their pooled funds. When we purchase mutual funds from the major fund companies, we are effectively purchasing the education, experience, skills and discipline of the mutual fund managers entrusted with our money. When one joins an investment club, we are attempting to replicate (and improve upon) some of those management attributes, but in a non-professional setting.
Investment clubs generally have more buying power as opposed to the case with individual investments thus more shares can be purchased at a given time which in turn increases the chance of getting quicker matches and hence, increasing investor satisfaction and in turn confidence in the whole capital market ecosystem.
A typical investment club will meet on a regular basis (usually every month) to review its existing portfolio and to take suggestions from club members regarding new investment opportunities. The monthly meeting is an open floor, where each club member is able to voice his or her opinion about the suitability of new investments and other concerns regarding the performance of the pooled funds. Unlike any mutual fund, the investment club is a true democracy. Here, the collective wisdom of the club members, combined with information they’ve gathered through intensive research, serves (in theory) to produce the best investment decisions.
The main aim of the C-TRADE Investment Clubs initiative is to bring traditional cooperative clubs to the stock market thereby enhancing financial inclusion. C-TRADE further aims to build a nest of long term sound investments options. There is the potential that the synergy of investment clubs can translate into higher returns than one could have achieved on their own. Through trading of securities in groups, C-TRADE aims to help individuals grow their wealth and increase income at the click of a button as all this is done electronically. Investment clubs generally have more buying power as opposed to the case with individual investments thus more shares can be purchased at a given time which in turn increases the chance of getting quicker matches and hence, increasing investor satisfaction and in turn confidence in the whole capital market ecosystem.
The C-TRADE Investment Club works in such a manner that the account creation and administration function consist of a member administration module which caters for account creation, adding participants, removing participants and a club members’ register. The administration module also facilitates the capturing of KYC documents and each member to contribute their share of funds through giving the system direct access to their personal accounts funds. When the administrator places a BUY order instruction to the Exchange, funds will be deducted from each group member’s C-TRADE account. In case of insufficient funds in a member’s account, the order in question is declined. When a match is made, the system calculates how much of a stake each person has in the club and presents it in the club menu under ‘Investment clubs shareholding details’. Apportionment of funds to club members according to what they have contributed through the use of basic ratios or percentage calculations. Likewise, in the event that a group member decides to leave the group; assuming that the group has holdings in various assets, the system will calculate how much stake holding one has and as soon as they leave, the relevant assets are deducted from the group’s portfolio. The investment clubs supports various payment gateways that include EcoCash and ZIMSWITCH.
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