P/e over tea: in­vest­ment clubs stage a comeback

So­cial investing was all but killed off by the soli­tary world of in­ter­net trad­ing. But now it’s bounc­ing back, says Laura Suter

The Daily Telegraph - Your Money - - YOUR MONEY -

Think of the pop­u­lar book club but, in­stead of dis­cussing plot and char­ac­ter­i­sa­tion over a glass of wine, you’re talk­ing mar­kets, price to earn­ings ra­tios and div­i­dend yields. And how to make money. In­vest­ment clubs were pop­u­lar in the Eight­ies and Nineties, but the sud­den emer­gence of on­line share deal­ing at the be­gin­ning of this cen­tury turned investing into more of a soli­tary ac­tiv­ity.

But now these clubs, like the mar­kets, are bounc­ing back.

Alex Bueso of ProShares, an um­brella or­gan­i­sa­tion for in­vest­ment clubs, said that in the past 12 months there had been a sharp pickup in in­vest­ment club reg­is­tra­tions.

“This was at times a sig­nif­i­cant rise,” he said. “In a month we would get 15 to 18 in­quiries from peo­ple want­ing to start clubs,” he said. Typ­i­cally ProShares has six new reg­is­tra­tions a month.

There are two rea­sons for clubs’ resur­gent pop­u­lar­ity, ac­cord­ing to Francesca Ec­sery of The Share Cen­tre, an on­line bro­ker. One is the wish to make investing a more so­cial and col­lab­o­ra­tive ex­pe­ri­ence. The other stems from a need to share knowl­edge and ex­pe­ri­ence at a time when mar­kets are volatile and sig­nals con­flict­ing.

“While there is a so­cial el­e­ment to most in­vest­ment clubs, there’s also a sound fi­nan­cial rea­son for investing col­lec­tively,” Ms Ec­sery said. “Ev­ery­one has unique ex­pe­ri­ences and per­spec­tives, and pool­ing that knowl­edge can be pow­er­ful.”

Mr Bueso agrees: “When in­vestors talk be­tween them­selves, it’s a san­ity check. It is good to have some­one chal­lenge what you think.”

Marjorie Sut­cliffe, a for­mer col­lege lec­turer, set up The 400 In­vest­ment Club, a York­shire-based all-woman club in the late Nineties – just as the tech­nol­ogy bub­ble was burst­ing.

The club’s first in­vest­ment was Tesco shares in 1999, fol­lowed by BT, Exel and Voda­fone, with £500 in­vested in each com­pany.

The club, which started with 10 mem­bers, has learnt a lot.

“Ini­tially we were look­ing for growth, but some of our de­ci­sions turned out to be bet­ter than oth­ers. We prob­a­bly held on to some shares too long, par­tic­u­larly dot­com com­pa­nies,” said Ms Sut­cliffe.

Each mem­ber con­trib­uted £25 a month up to a to­tal of £1,000. They have not con­trib­uted any new money since 2002. The group meet up ev­ery two months to share ideas and de­cide where to in­vest the money. Ms Sut­cliffe is trea­surer.

The 10 mem­bers take prof­its in the form of a pay­out ev­ery Christ­mas. While they may have started when the mar­ket was at a sky-high peak – the FTSE 100 re­cov­ered its 2000 high only in 2015 – by con­tin­u­ing to in­vest through­out the in­ter­ven­ing low points they have made some hand­some gains.

“From ex­pe­ri­ence we have learnt not to be­come at­tached to in­di­vid­ual com­pa­nies. We never buy on im­pulse and mem­bers re­search com­pa­nies which we then mon­i­tor for a time be­fore buy­ing,” she said.

The club has a so­cial side to it, with mem­bers or­gan­is­ing the­atre trips, lunches and days at the races, as well as their usual club meet­ings.

John Heard, from Soli­hull, is a mem­ber of an­other six-strong in­vest­ment club named The Stargaz­ers. They gather monthly in a pub. Each mem­ber also con­trib­utes £100 a month, with 5pc de­ducted each month to pay for drinks – “which en­cour­ages peo­ple to come”.

Hav­ing run for about 15 years the group peaked with 12 mem­bers, a num­ber that he said “be­came un­man­age­able”.

“There were too many peo­ple with dif­fer­ent ideas. Meet­ings dragged on and on,” he said.

Some years ago, af­ter a string of se­vere losses, some of the group de­cided to leave.

The club had drawn up a con­sti­tu­tion deal­ing with such sit­u­a­tions.

Mr Heard said: “At the time we had a lot of shares that were los­ing us money. We had a clear-out. As a re­sult we be­come more en­thu­si­as­tic.”

The group “very rarely” has heated de­bates about whether or not to buy cer­tain stocks, but Mr Heard ad­mit­ted that he was “not go­ing to make a for­tune” through the club. He has in­vested around £11,000 over the years and on this sum has made to­tal prof­its of about £8,500, of which £7,000 he has with­drawn.

He of­ten in­vests his per­sonal money in some of the shares dis­cussed in the meet­ings too, through other ac­counts.

Mr Heard said it was “dif­fi­cult to say” whether he en­joyed the club more for the in­vest­ment or so­cial side.

“It al­lows us to use an in­ter­est in investing with­out the same de­gree of per­sonal risk. By con­tribut­ing £100 a month it forces us to save a lit­tle more than we might oth­er­wise have put aside – and yet it spreads the risk. If some­thing goes wrong, it’s not on your shoul­ders alone,” he said.

There’s a lo­cal slant to the investing as well. Mr Heard said his club in­vested in con­ve­nience shop chain One Stop, be­fore it was bought out by su­per­mar­ket gi­ant Tesco, be­cause a mem­ber lived next to one of the com­pany’s ware­houses and saw a large pickup in ac­tiv­ity.

“It was one of our most prof­itable shares, which we bought purely on the ba­sis that he’d seen lots of lor­ries com­ing in and out of the ware­house,” said Mr Heard.

For Ms Sut­cliffe, fer­tiliser com­pany Sir­ius Min­er­als is of in­ter­est at the mo­ment as its York­shire Po­tash pro­ject is in the club’s lo­cal area.

“We have been for­tu­nate in achiev­ing what is the goal for ev­ery in­vestor – ‘ buy low, sell high’ and have made a sub­stan­tial profit on Sir­ius shares to date,” said Ms Sut­cliffe.

The prin­ci­ple of “club” investing goes back to the 1800s, when in­vest­ment trusts – com­pa­nies in their own right com­pris­ing nu­mer­ous

small share­hold­ers – pooled cap­i­tal to­gether to ben­e­fit from lower risks and re­duced costs of trad­ing, and to give them ac­cess to a wider range of as­sets. The same ben­e­fits ap­ply to the even more pop­u­lar “in­vest­ment clubs” of the 20th cen­tury – known to­day as “unit trusts”.

Small, self-man­aged clubs sim­ply repli­cate these struc­tures on a small and non-com­mer­cial ba­sis, bro­kers say – of­ten with ex­cel­lent re­sults.

Both Mr Heard and Ms Sut­cliffe said it was im­por­tant for all in­vest­ment club mem­bers to be in­volved, turn up reg­u­larly at meet­ings and gen­er­ate ideas for po­ten­tial in­vest­ments, as well as the ar­gu­ments to back them up.

“We have one mem­ber who ad­mits he’s too busy to do lots of re­search. But that’s OK, be­cause he’s the lo­cal butcher – and I get a dis­count on my sausages,” said Mr Heard.

A good chair­man and trea­surer is vi­tal, clubs say (see box, above).

“It re­ally helps to have an ef­fi­cient and hope­fully knowl­edge­able driver of the club,” Ms Sut­cliffe said.

‘We bought one of our shares only be­cause we’d seen all the lor­ries – a huge win’

Marjorie Sut­cliffe (in green scarf) heads The 400 In­vest­ment Club

‘Club’ investing has ori­gins in the 1800s

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