Investors are slowly joining the club

JUSTIN URQUHART STEWART

The Red Bull does it in the pub. The Brent Bravo does it on an oil rig. As for the Dirty Dozen, I wouldn't like to say.

The Red Bull, the Brent Bravo and the Dirty Dozen are three of the more colourful entries in Britain's register of investment clubs - groups of people who meet socially to place a collective punt on the stock market.

They may be friends who gather twice a month in a quiet corner of the bar, or workmates who meet during their tea break on the factory floor. They may be relatives who get together over Sunday lunch, or golfers seeking to score on the 19th hole.

What all investment clubs have in common is a sense of fun.

Playing the stock market doesn't have to be a grey pastime. The investment club approach offers an enjoyable, sociable, low-risk route to the thrills and spills of stocks and shares.

With a drink in one hand and a clutch of brokers' reports in the other, members discuss which stocks should be bought, sold or simply retained. Decisions are made by majority vote. Members club together to pool their contributions, making the sharedealing process much more affordable. And, of course, they pool the profits.

The idea itself isn't new. The world's first investment club was established in Texas in 1898, back in the days of the Wild West when few investments could be considered safe. Investment clubs were seen as an ideal way of spreading the risk - away from just cattle.

The rest of the world looked on, and liked what it saw. Today there are some 35,000 investment clubs across the globe. France alone has 15,000, while the United States is home to about 9,000.

In Britain the concept has taken root more slowly. About 800 investment clubs are active in this country. Half of them are members of ProShare, an umbrella body promoting wider share ownership backed by the Government, industry and the Stock Exchange.

Membership of ProShare is not compulsory, but it has advantages. Applicants wishing to set up a club are sent a useful "how to" manual, together with information about using a stockbroker, dealing with dividends and handling the taxman.

Investment clubs can have no more than 20 members - big enough to raise a decent sum of money but small enough for everyone to have his or her say. Two or three club members could be appointed trustees, with all the investments registered in their names, to guard against fraud. A clear and legally valid set of rules should be drawn up to avoid disputes.

The advent of ProShare has revitalised the investment club movement in Britain, for its history here, until recently, has been rather chequered.

The first British investment club was formed in 1959. Since then an estimated 3,000 clubs have opened up, but barely one in four has survived.

Many fell victim to the impact of falling share prices in the 1970s, coupled with an unfavourable tax regime. Club members drifted away. Some decided to seek a less exciting but more stable home for their money; others simply got bored with the paperwork associated with investment club transactions - and left.

There was also the damaging perception that investment clubs were not taken seriously by the City. Indeed, the Stock Exchange rarely went out of its way to encourage the concept.

All that changed, however, when ProShare arrived two years ago. Its avowed mission was to breathe new life into the investment club network. At last, someone big was batting for the small shareholder.

More and more stockbrokers are introducing services to handle the administration of investment clubs - such as dealing with the paperwork, processing dividends and tax returns, custody of share certificates and portfolio valuations - so that club members can concentrate on the more enjoyable task of picking winners.

The resurgence of interest in investment clubs could hardly have come at a better time for supporters of wider and deeper share ownership.

After the relatively easy period during the great privatisation drive of the 1980s, when millions took up the investment challenge, the investment club movement has provided a fresh boost to the cause.

Now the campaign for wider share ownership continues with the development of personal equity plans and tax-free employee share schemes.

Where, then, do investment clubs go from here? Onwards and upwards, in my view, particularly if the Government does the decent thing and puts them on the same tax-free footing as PEPs.

And that's only fair. Club members have always shown themselves willing to take the same risks as PEP holders. Now they should be eligible for the same rewards.

The writer is business development director of Barclays Stockbrokers