Want to make money in stocks? Then join the club, says MR MONEY MAKER Justin Urquhart Stewart
How can we learn what not to do?
Investing can be a rather lonely business – but it doesn’t have to be. And educating oneself about investment can be a rather painful business of learning from experience and mistakes.
There are self-help books and worthy tomes from the worldly wise, alongside online information shouting to get your attention. Some of these are perfectly good but for most, nothing can really beat some face to face discussion and direction.
And you don’t have to be alone.
Ups and downs: The great advantage of an investment club is that the risk is less and shared, and the knowledge and experiences are also shared and pooled
Shared thoughts, words and deeds (and money and risk)
Investment clubs are rarely mentioned these days, but in the 1980s became quite the thing. Simply put, it is a group of friends (at least to start with) meeting monthly to drink, discuss investment ideas and have another drink. Usually I have seen these as having around 15 members all contributing, say, £50 a month into a cash pot for investment.
Preferably the group should have a breadth of knowledge, not of investing or finance, but about whatever business area they come from. The aim would be that each could follow a group of stocks and in due course put forward their proposals for the group to decide what to invest in.
The great advantage here is that the risk is less and shared, and the knowledge and experiences are also shared and pooled.
Buying your own investments can be quite a frightening experience if you have never been involved before. Listening to pompous financial gits in red braces may not help but learning through real experience without risking large losses has to be a benefit.
Also, it may even turn investing into more of a fun hobby, and at least you will have a far greater knowledge of the financial investment world and less chance of being either misled or mis-sold.
What should we do?
There was a group called Proshare which focused on helping new clubs with a standard constitution, a simple portfolio software package and a helpful list of potential pitfalls. Although that has gone, certain stockbrokers still help investment clubs and should be able to provide some support.
I have always belonged to one, although my attendance has been abominable. They are a very diverse group, and will admit that they have learnt through both poor and good investment selections what to do and what to look out for.
Above all, the members now have a far greater understanding of investment issues that they can use to their benefit when looking at their pensions and possibly broader family finances. Oh yes – and they have made a profit for themselves.
Proshare no longer exists in its original form, but look up proshareclubs.co.uk. Also look at the Motley Fool website, fool.co.uk.
If possible, try to visit a club meeting and see how it works and hear directly from them what they have learnt.
Justin Urquhart Stewart co-founded fund manager 7IM and is chairman of investment platform Regionally.