By Stacey Coffin
A couple of years ago, looking for an excuse to get together regularly and quaff wine, I suggested to my friends that we start a book club. The chorus of "I don't really read" and "could we do podcasts instead?" meant this idea didn't get very far. I'm still silently judging them but, luckily, they met my next suggestion with much more enthusiasm - an Investment Club.
The idea was simple: we'd get together about once a month, everyone would bung £25 in a kitty, and we’d choose something to invest in, hopefully learning a bit about the stock market and how the whole thing works along the way. And, of course, there would be wine. And probably pizza.
We quickly had about a dozen friends keen to get involved. Most of us had started gingerly dabbling in personal investments here and there but we were still very much 'beginners'. So, the primary focus of the club was to learn, not make a quick buck or invest vast sums. As keen as I was to keep things super informal and not take ourselves too seriously, I was conscious that ultimately, we'd still be dealing with people's actual money, so we decided we'd need some rules. A quick google told me this was not a new idea. Many sites suggest how to get a club up and running, with templates for drafting a constitution and suggestions for everything from committee roles to deciding on your investment strategy. There are even brokerage accounts specifically for investment clubs. I started with a basic two-page constitution, shared it with the group, and we arranged our first meeting to discuss.
Our first meeting was very productive. We quickly agreed on how to run the club and even bashed out our name – 'Hit & Hope Investment Club'. (Other contenders were "Smack It and See Inc." and, in homage to Google's mantra, 'Don't Be Evil', "Don't Be A D*ck Investments".) We agreed to name a chairperson, secretary, treasurer, and broker to do all the jobs that allow the club to run month-to-month. We also decided on two levels of club membership: General Members, who participate in all facets of club activity; and Silent Members, who contribute funds but do not attend meetings or get a vote on investments. The latter was mainly for our partners who wanted to get involved in the investing but didn't want to crash girls’ night (or, frankly, do any of the research, debating or decision making). We all signed the constitution, and after two months' contributions, we chose our first investment - an IPO launching the following week.
In those initial months, we discovered that while the idea is simple, there are still a lot of things to think through:
· How do we calculate what portion of the club each person owns? It sounded easy at first, but what happens if someone new wants to join later? Or someone wants to invest more than £25 a month?
· What if someone wants to leave the club - do we need to sell investments to cash them out?
· What if some investments can't be easily accessed, for example, equity crowdfunding?
· What are the tax considerations?
One of the most challenging issues we've had was just getting a bank account set up. (We couldn’t keep stashing all our monthly contributions in a big sack marked “swag” forever…) We assumed we'd be able to get a club account that most banks offer, but it turned out we didn't qualify, as we were seen to be trying to make a profit, so banks considered us to be a business. We came up with an interim solution of a joint account in two committee members' names, and finding a better solution is something we're working on. Still, for now, we're small fry, so everyone is comfortable with the arrangement.I can barely believe that more than a year has gone by since that first meeting, and in all, it’s been a huge success! We've now invested in seven publicly traded companies and two equity crowdfunding opportunities; we were in the black at the one-year mark, and though that's fallen slightly (thanks a bunch COVID-19), there are glimmers of hope on the horizon; changes in circumstances have seen a few members leave but we’ve also welcomed new faces; we've altered our constitution to reflect some of the kinks we worked out over time; and we've learnt an awful lot, from how an IPO works to how to buy options.
Overall the club has been a great way to pool our knowledge, share risk, discuss and debate, and learn together, all while keeping in touch with friends and making some new ones too!