Investment Clubs have been springing up at a rate of knots all over the country in the last 2-3 years. The club culture has opened up a whole new world for many people who previously only used the financial pages of newspapers to start fires with or wrap their chips in.
But have you ever thought, "What is it all for?"
To make money.
"But what do I want to make money for?"
Now this is not such a stupid statement as it might appear. Taken at face value it is obvious that most of the populace require additional money. Just being alive costs you money. The standard of living is ever increasing, and the continual cash drain on the pocket does not get any easier over time. You want to make money to live. Kids, in particular, cost a fortune.
But you can't live on Investment Club proceeds, can you? It's an investment and as such needs time to perform, to make the money work for you. So you can't take it out as and when you need it because then it will not perform at all. So there has to be a slightly deeper motive for wanting to make money with a club.
Is it your retirement that you are planning for? I am, with H&G. That will run for 30 years, hopefully, unless the members get fed up. The Brass Monkeys and Dirty Harrys are shorter 5-year clubs that act as a mini-savings plan. They were originally set up so that people would NOT feel the need to raid the H&G coffers. After all, there is no point in continually investing without ever seeing the returns. If the figures never get off the paper, they are little use. Show me a Travel Agent who will accept as payment a unit valuation sheet showing that you have a £2k holding in a club and I'll show you thousands of club members ready to book a holiday!
Which kind of leads me nicely onto the main bones of this article. A holiday is one of those things you might well be investing for. Big family holiday to Florida, perhaps. A once in a lifetime trip down under to catch up with long lost family.
And what if the members of the club all want to go away together? Let me explain further.
In October 2000 there will be launched another Investment Club from the H&G family called "The Inside Edge" Investment Club. This will be specifically set up to take club members to the Caribbean for the Barbados Test Match between the West Indies and England on the next winter tour of that area in 2004. In practice there will be only 3.5 investing years so the club's life will be relatively short. However, with sensible initial investments and a bit of luck we will still outperform the banks and hopefully an initial investment of £500 and subs of £25 per month will see each member return enough to pay for the trip AND the spending money. No guarantees of course, but is that or is that not a great idea? How many people can say they would have enough spare cash to finance a West Indies trip at short notice? This sort of financial planning makes such a burden much easier to bear.
Granted, not all the club members in every club are going to want to go away with each other on a holiday. But I'm sure you take the point. We are investing for a reason! We now know when to wind the club up and cash in. Similar principles can be applied to individual stock selection. If you know why you are buying a stock in the first place, it is so much easier to know when to sell.
Watch for news on the Inside Edge IC later in the year.
Fool USA