Strike it rich in the inner circle

WHEN was the last time you saw a burly stonemason discussing the merits of a company which makes women's underwear with the headmaster of the local primary school over a drink in the pub?

Yet each month, in pubs and restaurants across the land, conversations such as these are regular occurrences. Voices may be raised and drinks spilled, but in a quest to boost fortunes, no subject is taboo for members of the UK's almost 10,000-strong investment clubs.

Our group, the Volunteer Venturers Investment Club (VVIC), was launched in May 2000 in Chipping Campden, Gloucestershire. The 20- strong VVIC includes local businessman Ken Dawson, stonemason Graham Greenal and pub landlady Hilary Sinclair amongst its membership.

The club's honorary secretary is retired lawyer Richard Price, who takes the minutes at each meeting. IT support specialist George Bryant doubles up as the club's treasurer. And like most members, they were new to stock market investing.

Investment clubs allow groups of up to 20 family, friends or work colleagues to join together, usually once a month, with the aim of investing in companies on the stock market. Most clubs require a modest outlay from members, say pounds 20 a month.

Of course, the aim of the game is to make money. Even though the emphasis should be on fun, well-run clubs will also seek to widen the financial knowledge of their members. If understanding City jargon, such as p/e ratios and rights issues, can be done over a drink then so much the better, goes the philosophy.

Participating in a club also provides private investors with an insight into the challenges faced by professional fund managers responsible for running billions of pounds worth of equity-based unit and investment trusts.

It's no secret that last year was a nightmare for stockmarket investors, both professional and private alike. Dotcoms became microdotcoms, Marconi Investment clubs are the best way to maximise the fun and learning of investing in the market. Here, Andrew Michael gives his firsthand view of this increasingly popular, and occasionally lucrative, hobby imploded and Railtrack disappeared from the market over night.

According to ProShare, (www.

proshare.org) a governmentbacked organisation which helps get investment clubs off the ground, clubs made an average loss of around 15 per cent on their investments last year. This was in line with the performance of many City professionals.

NOT surprisingly, our overall investment aim at VVIC has been to achieve long-term growth from a balanced portfolio of shares. Where possible, investments are made into companies with a local presence in the region.

The notion of investing ethically has made rapid inroads in the private investor market in recent years. And following a particularly lively debate at one meeting, we now avoid investingin companies whose ethical criteria do not stack up quite as highly as their corporate prospects.

As with many investors, we've suffered ups and downs over the past year.

Gains made in 2000 by the likes of high-tech companies such as Bookham Technology reversed big-time, prompting the club to retreat back into the safer havens of larger, old-economy stocks. Consequently, we added firms such as food-maker Unilever, banking group HBOS and water company United Utilities to our ranks last year.

Coupled with this came exposure to smaller players such as local IT specialists Marlborough Stirling and niche pharmaceutical player Xenova.

Amazingly, we have yet to invest in a brewing company.

This is a major surprise and definitely an item for future agendas if the number of empty glasses at the end of a monthly club meeting is anything to go by.

Andrew Michael is chairman of the Volunteer Venturers Investment Club.

Investment clubs: dos and don'ts DO stress to would-be investment club members that they are unlikely to make a fortune overnight and may even lose money.

DON'T forget that investment clubs allow up to a maximum of 20 members.

DO have a dry-run meeting before taking the plunge proper to establish ground rules.

These should include overall club aims, monthly contributions, rules on how to value each member's share etc.

DON'T forget to appoint a regular venue for your monthly meetings.

DO appoint responsible individuals to the roles of club chairman, treasurer and secretary.

DON'T neglect the formalities of setting up a club. For newcomers, ProShare publishes a manual, priced pounds 29.50, which contains all the relevant information and paperwork needed to create a successful club.

DO shop around for the best stockbroker.

More information on stockbrokers can be obtained from apcims.org, the website of the Association of Private Client Investment Managers. About 60 per cent of clubs trade via an online broker. Many brokers offer dedicated investment club services with cut-price commission deals.

DO set up a club bank account which requires co-signatories to release funds.

DO run the club democratically. Members should be encouraged to have an equal say on club matters, regardless of their financial knowledge.

DO discuss the merits of setting up, buying and selling limits for stocks, especially ones with more volatile tendencies.

DON'T leave company research to other club members each month. Be active and you will soon expand your knowledge of the financial world considerably.

Copyright 2002
Provided by ProQuest Information and Learning Company. All rights Reserved.