The poor man's investment club

Pooling knowledge and cash can earn you a tidy sum.

Most of us don't have the chance of playing Monopoly with real money. We have to leave that to train-robbers and other wealthy financiers. But do we, at least, have the chance of dabbling in the market without burning our fingers?

Many of us are already successfully invested in the stock market without realising it. After all, that is where most of our pension and assurance monies have been invested and although we rarely hear what is happening to them, most are, hopefully, properly invested and managed for us. We also invest in investment trusts and unit trusts to invest on our behalf.

But it is possible to invest in the stock market direct with very little cost, and also remarkably little capital. I would never suggest that anybody borrows to invest in the stock market. That way can lead to ruin. But through modest investing and careful collection of company information and knowledge, you would be very surprised how large a portfolio can be created.

To invest successfully in the market, there is one key issue that you will require. It is information. I don't mean secrets and inside knowledge, but rather information on industry experience, trading abilities, sector comment, factual history and financial data. Again, somewhat surprisingly, most of this is readily available if you know where to look. Your main difficulty is having the time to collect and collate it all, so that you can decide what to do.

But what about the money? Traditionally, an adviser would say, quite rightly, that to invest in the market, you need to establish a balanced portfolio spread over various sectors and that, to start with, you could need a minimum of, say, pounds 20,000, to buy up to 20 different stocks to give a spread of risk. Each holding ought to be worth at least pounds 750-pounds 1,000 to cover the dealing costs, which will be a minimum of pounds 10 or pounds 12.50 a time.

You can, however, start with as little as pounds 20. But how?

Potential investors could form an investment club based around their friends and colleagues. From such a group, a modest monthly contribution could be paid by standing order into a bank account.

Suppose, therefore, that 15 people got together and paid in pounds 25 per month, then after two months they would have enough for a modest first investment of pounds 750. After 12 months, this would have risen to a surprising pounds 4,500. Every meeting, which could be on a monthly basis thereafter, would then decide what else to invest in and whether to sell the existing holdings.

Within a few months, this group of inexperienced investors would have become investment hobbyists, each keeping their eyes and ears open for new ideas and opportunities. By pooling their experience, knowledge and cash, they could learn about the market, invest directly and even have fun. This latter item is a concept normally frowned on by the industry when talking about money.

Often, club members choose specialist areas to look into themselves, and then bring back the results of their research to the club meetings. Club members who have specialisations often know more about certain sectors and companies than many brokers.

Thus, the two main difficulties of investing in the stock market will have been overcome. By having a group of like-minded individuals to share the responsibility of information-gathering, you can suddenly become one of the best-informed investors in the market. As for the money, by sharing the costs and the risks, the contribution is very modest, arguably cheaper and more fun than investing in unit trusts.

Setting up a club and handling all the paperwork and bureaucracy, used to be extremely tiresome and rather labour-intensive. Some stockbrokers, however, are now taking a more enlightened view on encouraging clubs. Some have even set up special investment club services. For a club to operate efficiently, it is best to keep its share certificates in a nominee account looked after by the broker. This keeps the paperwork to a minimum, and dealing can be carried out straight away, without the need to send in share certificates every time a sale is made.

Normally, the club will have a bank account linked to the broker so that all the funds are kept "in the pot" and under the signatures of at least two of the members.

For more information there is a national association called Proshare Investment Clubs (PIC) which produces an excellent handbook that goes through the process of how to set up a club and what documents are needed. PIC also runs annual awards for the most successful clubs and encourages their development and promotion.

In addition, a useful book on the subject, Investment clubs - the low- risk way to stock market profits (published by Rushmere Wynne), has recently been published and is available from 4/5 Harmill, Grovebury Road, Leighton Buzzard, Beds, LU7 8FF (or credit-card hotline number 01525 850270), price pounds 5. The book is written by Tony Drury who has been involved in clubs for some time and has learnt all his knowledge directly as a private investor.

Investment Clubs certainly aren't made up of millionaires, although I suspect some would certainly benefit from joining one, but in my view it is probable that there are several future millionaires in them already. We can play Monopoly for real, and without going to "Jail". I'll have the Boot if you have the Racing Car. Your throw.

The writer is business planning director at Barclays Stockbrokers.

Proshare Investment Club can be contacted on 0171 600 0084.

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

Finacial products from our partners
Property search
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Recruitment Genius: Retirement Coordinator - Financial Services

    Negotiable: Recruitment Genius: To provide a prompt, friendly and efficient se...

    Recruitment Genius: Annuities / Pensions Administrator

    Negotiable: Recruitment Genius: You will be the first point of contact for all...

    Ashdown Group: HR, Payroll & Benefits Officer - Altrincham - up to £24,000.

    £18000 - £24000 per annum + benefits: Ashdown Group: HR, Payroll & Benefits Of...

    Ashdown Group: Learning and Development Programme Manager

    £35000 - £38000 per annum + benefits : Ashdown Group: A highly successful, int...

    Day In a Page

    Election 2015: How many of the Government's coalition agreement promises have been kept?

    Promises, promises

    But how many coalition agreement pledges have been kept?
    The Gaza fisherman who built his own reef - and was shot dead there by an Israeli gunboat

    The death of a Gaza fisherman

    He built his own reef, and was fatally shot there by an Israeli gunboat
    Saudi Arabia's airstrikes in Yemen are fuelling the Gulf's fire

    Saudi airstrikes are fuelling the Gulf's fire

    Arab intervention in Yemen risks entrenching Sunni-Shia divide and handing a victory to Isis, says Patrick Cockburn
    Zayn Malik's departure from One Direction shows the perils of fame in the age of social media

    The only direction Zayn could go

    We wince at the anguish of One Direction's fans, but Malik's departure shows the perils of fame in the age of social media
    Young Magician of the Year 2015: Meet the schoolgirl from Newcastle who has her heart set on being the competition's first female winner

    Spells like teen spirit

    A 16-year-old from Newcastle has set her heart on being the first female to win Young Magician of the Year. Jonathan Owen meets her
    Jonathan Anderson: If fashion is a cycle, this young man knows just how to ride it

    If fashion is a cycle, this young man knows just how to ride it

    British designer Jonathan Anderson is putting his stamp on venerable house Loewe
    Number plates scheme could provide a licence to offend in the land of the free

    Licence to offend in the land of the free

    Cash-strapped states have hit on a way of making money out of drivers that may be in collision with the First Amendment, says Rupert Cornwell
    From farm to fork: Meet the Cornish fishermen, vegetable-growers and butchers causing a stir in London's top restaurants

    From farm to fork in Cornwall

    One man is bringing together Cornwall's most accomplished growers, fishermen and butchers with London's best chefs to put the finest, freshest produce on the plates of some of the country’s best restaurants
    Don't believe the stereotype - or should you?

    Don't believe the stereotype - or should you?

    We exaggerate regional traits and turn them into jokes - and those on the receiving end are in on it too, DJ Taylor
    How to make your own Easter egg: Willie Harcourt-Cooze shares his chocolate recipes

    How to make your own Easter egg

    Willie Harcourt-Cooze talks about his love affair with 'cacao' - and creates an Easter egg especially for The Independent on Sunday
    Bill Granger recipes: Our chef declares barbecue season open with his twist on a tradtional Easter Sunday lamb lunch

    Bill Granger's twist on Easter Sunday lunch

    Next weekend, our chef plans to return to his Aussie roots by firing up the barbecue
    Joe Marler: 'It's the way I think the game should be played'

    Joe Marler: 'It's the way I think the game should be played'

    The England prop relives the highs and lows of last Saturday's remarkable afternoon of Six Nations rugby
    Cricket World Cup 2015: Has the success of the tournament spelt the end for Test matches?

    Cricket World Cup 2015

    Has the success of the tournament spelt the end for Test matches?
    The Last Word: Justin Gatlin knows the price of everything, the value of nothing

    Michael Calvin's Last Word

    Justin Gatlin knows the price of everything, the value of nothing