An investment club is a great way to learn about investing. You can give different members the responsibility to each research a different topic, and then educate the group on it at regular meetings. Members could even go to a seminar on behalf of the group and report back.

By working as a group you are able to control your emotions and implement your investment strategy. As an individual you may get caught up in the hype of the market or you may not have the courage to buy when the market is making losses, but as a group, you are making unemotional decisions and can keep one another accountable.

However, starting an investment club has its challenges. The main challenge is having everyone equally committed. There is no point in starting a club unless you know that the people involved will be 100% dedicated.

There will be issues like non-payment by members, lack of attendance at meetings, or lack of participation by some members. The admin side of things can also be tricky, especially getting everyone together at the same time and getting the FICA documents together.

The constitution of your investment club

Whether you are setting up a stokvel, a savings club or an investment club, your need to put a proper constitution in place. This will set clear objectives on what you aim to achieve and is useful when resolving disputes.

You need to include the following items in your constitution:

• The name of the club
• The full names of all members
• Membership criteria: You can stipulate the number of members, or set a lower and/or upper limit for membership numbers. You can stipulate any conditions on membership, for example, that a new member needs to get full approval of all existing members, or that it is a women’s-only or men’s-only investment club.
• The objectives: What type of club do you want to be? Are you a savings club that you use to save up for school fees and end-of-year commitments; are you forming a savings club to go on holiday; do you want to start a long-term investment?
• Type of investments: Based on your objectives what savings or investment vehicles will you include?
• The terms and conditions: Will the group allow the member to use the account as security to obtain a loan? What happens if a member cannot meet a monthly contribution or wants to cash in their investment? It is important to note that the bank will not accept a stokvel account as security against a loan even if provided for in the terms and conditions. However, the members can borrow from the account.
• Entrance fee: If you decide to have an entrance fee, stipulate how much that will be. Some clubs stipulate that this is used as a deposit and if a member wants to leave they forfeit the entrance fee.
• Subscriptions: This will include the amount payable by each member and when it is payable.

The general meeting dates: Having regular meeting dates such as the first Saturday of the month is very important. Members have to commit to this.