The stock market's behaviour -- no, let me rephrase that -- the behaviour of the majority of the stocks owned by the investment clubs I am involved in is now exactly like the old Status Quo song and heading "Down Down, Deeper and Down". Where will it all end?
It's not often that I will say this but unless your club is about to wind up imminently (and for your sake I hope you will have not waited until the last minute to sell the entire portfolio) then who cares?
In a couple of years' time I'm sure we will all be wondering what the fuss was about. So let's go on to other things for a change.
Whilst speaking to the "Medway Moneypit" investment club recently, some of the questions I was asked by the members related to administrative issues. In fact, one of their members proposed that their next meeting was entirely devoted to sorting out procedures, rules and constitutional issues, without any stocks being discussed at all. Good idea, that.
Right, so what sort of administrative problems can a club face?
Who buys the drinks?
If you meet in a pub, then the chances are that at the first meeting or two, there were one or two members who bought a round of drinks. Even us boozy souls in H&G realised that it was not possible to consume double-digit volumes of beer in one evening and still talk coherently about stock and shares. Or even talk coherently at all, actually. So we now operate a "whip" system, and have appointed as a club official, a "chief whip holder". All attending members pay £5 into a whip at the beginning of the meeting. When the whip runs out, all drinking members (not drivers!) pay another £5. The surplus (if any) is recorded by the chief whip holder and carried forward to the next meeting. This works quite well.
How do you do your accounts?
Many clubs I know have their own spreadsheets for this purpose and I am sure they work extremely well. The ProShare manual contains all the forms needed for Club Treasurers to calculate the unit valuation manually. However, also contained in the ProShare manual is a discount voucher for COW2000, a computer program written specifically for Investment Clubs by Computer Office Workshops. I strongly recommend this program. I am the Treasurer of two clubs and the monthly accounts and valuation process takes about 30 minutes for each. It will also perform all necessary tax calculations.
How do you vote?
This is an interesting one. What sounds such a simple process can get into a bit of a minefield if you attempt to try and put some "weighting" into the voting process. For instance, should each member have different voting rights? As an example, Fred has 2500 units in the club and is a founder member. Paul is a new member and only has 50 units. Should Paul's voting rights count the same as Fred's? It might get a bit complicated if you try and work that one out in a fair and democratic way! All the clubs I am in operate a "one person, one vote" system with a majority decision required. In the event of a tie, the Chairman has the casting vote. This is simple. I am not saying this is the correct way of doing it, merely recounting what we use as a tried and tested system that works.
When do you buy the stocks?
So, you have your meeting at night, you decide to buy £1,000's worth of ABC Widgets Ltd, and the power is given to the club officials to "do the deal". When do you buy? Suppose the following morning there is unexpected good (or bad) news which moves the price dramatically? In our clubs, we have no real contingency plan. We know the reason we decided to buy the stock, and would probably do so in any event (if the news was good) However, if the news was bad, i.e. a profit/earnings warning, then we would probably not. However, the Medway Moneypit had what I considered quite a good system. They gave their "Executioner" (the person doing the deal) a 15% upside in the price. This means that as long as the price is within a 15% upside of the price agreed at the meeting, then the deal goes ahead. They didn't say what happened if the price fell off a cliff, though...
These are just some issues in running a club of course. You'll have noticed I prioritised them, put the buying of the drinks right up there at the top! Seriously though, if there are any other burning issues you want discussed, then please post them on the discussion board and I will cover them in a later article.
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