The Heirs investment club is just in its early stages and it faces the same challenges as all investment clubs.

“I have had this vision for some time, after seeing a show on Oprah of ordinary ladies who had become multi-millionaires by investing as a group on the US stock market, ” says founding member Cleo Radebe. “I believe one can make a lot of money on the stock exchange and also thought that it would be easier to save some money and start investing as a group.” Radebe has been reading investment books, sitting in at property auctions and attending investment seminars.

“When we started attending meetings to discuss constitutions and potential business ventures, it became clear that this might just be the start of a brighter future – born out of women trusting each other to share the fruits of this humble beginning,” says club member Bridget Masango.

Starting a club is unfortunately not as easy as simply having a vision. Radebe says the reality is that at the end of the month there is not much money left over to save for any investment.  “In the first meeting where I shared the vision, there were about 25 ladies and all were excited.  But it became clear later that only a few could manage to spare the R1000 a month to start building a kitty,” says Radebe.

Although 20 women are committed to the vision, only 11 have made contributions and two of these women have pulled out already, which means there are nine women who have made payments. Radebe says a serious challenge is members not being able to keep up with the monthly payments for the minimum five-year period, which would affect the viability of the club. It takes time to build up a sustainable club and to find members who are prepared to make the sacrifices to build long-term wealth. Not everyone has the same level of financial commitment. Initially Kgaphola’s Ya Rona club saw many member changes until they were able to find a more stable group.

A key starting point is to find a homogeneous group – in other words a group of people who share the same vision as well as life experiences. Most successful groups will be of the same gender, and of similar age, income and culture. A group of women in their late twenties will have very different needs and experiences from a group of 50-year-old men, for example. Income levels also need to be similar so everyone can afford the same level of contributions. Due to the need for the club to homogeneous, smaller clubs tend to be more successful and the Heirs investment club may just find that around 10 members is the figure that works for them.

One also needs to build in rules and buffers for non-payment. This becomes even more critical if you are buying property, for example, where the mortgage has to be repaid each month – the club cannot afford non-contributions. The Ya Rona club has penalties for non-payment but also allows members to pay in additional funds when they are available in order to create a buffer should they be unable to contribute one month. Allowing members for example to use their bonus to boost their funds could be a way to smooth contributions over the year. This all needs to be clearly stated in the constitution.