Club together for finance fun

Investment clubs are a great way to learn the basics of the market. By Kirsty Greenwood

"IT'S A laugh, it's a few beers and it's a chance to make money." This is Mark Goodson's opinion of investment clubs. Mr Goodson is the treasurer of H&G Investment Club (H and G stands for The Horse and Groom, the pub where the club meets). Investment clubs are groups of people, often novices to the world of stocks and shares, who pool their resources to invest in the stock market. The number of investment clubs in Britain is increasing rapidly. According to Finola Healy, head of communications at ProShare, an organ- isation promoting direct share ownership, there were 300 investment clubs affiliated to ProShare in December 1996. Today there are 2,800 affiliated clubs, and Ms Healy estimates there are another 200 non-affiliated clubs.

Ms Healy says: "We recommend that people start their own club, rather than joining an existing one. Where money is concerned it is best to be with friends that you can trust." The members vary greatly: "There is no typical investment club - they range from golfers and rugby players to housewives, city people and pensioners."

Most clubs first hold an exploratory meeting to discuss which companies they might invest in. Members then go away and track these companies. "They pick a share and think, `If I bought this, how would it have done?' Members then invest just when they feel comfortable," says Ms Healy.

She stresses that no prior knowledge of the stock market is necessary: "For the most part, club members are initially novices. But most people will have knowledge of an industry. For example someone going out shopping on a regular basis will know about the fashion industry. Everyone in the club should take a different interest and focus, and learn from each other."

Guy Knight, a vice-president of Charles Schwab Europe, a stock-broking company which acts on behalf of between 500 and 1,000 investment clubs, says the clubs are "predominantly about enjoyment and learning".

Club members pay a monthly subscription, typically between pounds 20 and pounds 25, but sometimes as little as pounds 10. Once clubs have decided where they want to invest, a stockbroker is needed to carry out transactions for the club.

Club size is restricted to 20 members, because they operate like partnerships and any more than 20 members would mean that the club would have to be registered as a limited company. Ms Healy adds: "A membership greater than this makes it awkward to make decisions. We try to emphasise the fun side. If you make a mistake, you lose money, but don't worry about it too much. Get back in there and do your research."

Mr Goodson adds: "If you have 20 members, only 1/20th of the money is yours. You can be really, really risky. It's amazing how much more risky you get after a few pints of Speckled Hen!"

Mr Knight believes that working in a group "stops you from making silly decisions... at the end of the day it is a democratic process."

ProShare awards three prizes every year: for the most successful club (won this year by Tykes International, Yorkshire who made profits of 101 per cent); for the best club overall regarding the running of the club and how much fun they have; and for the best newcomer.

Among other competitions run by Proshare is the Share of the Month competition, which asks clubs to pick the share that they think is going to be most successful in the coming month. The winners receive a pounds 1,000 prize.

ProShare also provides a starter manual which gives advice on starting up an investment club. ProShare membership (the first year is free when you buy the starter manual) entitles clubs to access to their helpline and magazine, enables them to attend the Investment Club seminars run by ProShare and NatWest stockbrokers and gives them information on computer software to help revalue stocks and shares.

ProShare are now in the first cycle of their renewal programme with 70 per cent of the clubs continuing their membership. Ms Healey says: "It is difficult to know why the other 30 per cent are no longer functioning, but clubs do close down as people leave the area where the club was first established."

The ProShare Investment Club manual is available from ProShare, Library Chambers, 13/14 Basinghall Street, London EC2V 5BQ. Credit card orders: 0171 394 5200. The price is pounds 25, but to The Independent readers it is pounds 17 plus pounds 3 postage and packing.

Clubbable

FLYBOYS IS an investment club set up in April by the current and past members of the Cab Air College of Air Training Flight and Ground at Cranfield Airfield, Bedford.

Mike Dyson, head of training at the college and chairman of Flyboys says: "We currently hold our monthly meetings on the College's premises, but hope to shortly start meeting at a local hotel with a meal and drinks afterwards and make a social evening of it."

Flyboys currently has 17 members who initially invested pounds 200 each in the club and now make a pounds 20 monthly investment. They agreed that whenever the club has built up pounds 1,100 of funds, it would be invested in preselected companies.

"We have made no profits as of yet," adds Mr Dyson, "Due to the decline in share values since July, we are rather more down than up at the moment. We have the cash in the bank and are waiting for a down-turn in the market."

Mr Dyson's tip to anyone interested in setting up an investment club is to be more careful than Flyboys was - at least initially. "You should sit on your hands a bit more, take the medium- to long-term view, and not overreact to sudden falls in the market. We did - and it cost us quite a few pounds."