This article will, amongst other things, concentrate on a useful "insider" technique designed to maximise returns made by individuals in their respective Investment Clubs.

Before I get stuck into that, I must mention the unbelievable performance achieved by the 3 regularly-meeting Investment Clubs over the last month of 1999.

In October and November, we made a conscious decision to try and jump aboard the "Technology Train" that was threatening to leave us behind at the station. Some of you may have read about "The Curse of the Monkeys" in the last article and what action the Brass Monkey Investment Club took to improve its investment performance.

Well, so far it has worked with, shall we say, spectacular results. At the November 99 valuation the Brass Monkey portfolio stood at £29,000-ish. One month later, the portfolio was valued at £43,000-ish. Now I make that an increase of over 48%. In a month. Not too shabby, I think you'll agree, and the members should certainly have smiles on their faces when they receive their valuation sheets in the post!

The need for change in H&G was not quite so necessary, but the club did get into a few "flavours of the month" and that club's portfolio rose by over 35% in November.

The Dirty Harrys have also enjoyed a bumper time. Of the six stocks purchased at the November meeting, we are roughly breaking even on Vodafone AirTouch (LSE: VOD) and BATM Communications (LSE: BVC). ARM Holdings (LSE: ARM) is standing us in at a 52% gain, NXT (LSE: NTX) is up by 128% and Infobank (LSE: IBI) was sold at a 133% profit. Interestingly, if we had kept Infobank, then it would be returning nearly 400%. Why was it sold, I hear you ask? Well, the chap who recommended it to the club also saw the news announcement about the company entering into merger talks and noticed that the company said that "they would take some time". All available members were telephoned and the consensus was to sell. Two days later, the merger talks were off -- the shares dropped by quite a bit. Shortly afterwards, the Company announced a move to the main market -- the shares leapt to new and higher ground. Still, it's the members that make the decisions and it does give us £4K to spend at the next meeting. Overall, the club has made in excess of 50% in its first month (is this a record?), so we haven't done too badly, have we? I know it could all disappear again, but let's bask in the glory for a little while!

This does bring me nicely to the main point of the article, and I shall use The Brass Monkeys as a terrific example.

Over the 2.5 years the Brass Monkeys have been in existence, the unit value (most clubs should be familiar with this method of valuation) started at 1 and fell to under 0.6 at one point. When you bear in mind that there is at least £500 in monthly subscriptions that come in this is even more depressing than it looks. However, clever (and, it has to be said, more affluent) members increased their holdings in the club when the Unit value was low. Under Inland Revenue rules, to qualify for the "simplified" scheme, no member can put in more than £1000 in any one year. With a monthly subscription level of £25, each member is committed to £300 annually, leaving up to £700 which can be put in over and above the monthly amount.

So, let's say the club has a bad time one month and the unit value falls to 0.6. An additional £100 at that point will purchase 166.66 additional units.

Now assume that, over the course of the year, the club's performance improves and the unit value rises to 1.4. The additional units previously purchased are now worth £233.33 - a whopping 133.33% increase.

Because valuations are carried out monthly, members who keep an eye on the prices can identify months where there may be sharp swings in the unit value and, if club rules allow, they can react accordingly with the purchase of additional units mid-month.

This is exactly what has happened with the Brass Monkeys, with the most extreme example being that of a member who last month was making £113 and is now almost £1000 in profit. All because extra units have been purchased in past months when the value has been low.

It is only when the value is high that the full effect of this can be demonstrated. As we all know, the value of shares can go up or down, so don't get despondent if prices bump along the bottom for a while. Pile in with some extra cash -- then sit back and wait. In time, things will turn around, and you will reap fantastic rewards.

Post questions and comments to the Investment Clubs message board.

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