By Hassan Kitenda
Lately there has been a huge uptake of Investment Clubs in Uganda . Well, this can be attributed to a certain hunger to invest, grow and succeed and one of the fastest ways to meet these goals is by setting up investment clubs.
Here, members pool financial resources with the aim of creating wealth. They are slowly becoming an integral way of performing business and are now investing in various asset classes such as real estate, commodities, fixed incomes and equities. Investment clubs are no longer restricted to close family and friends but are open to different individuals who are seen to bring different expertise that add value to the groups. Investment clubs have grown in sophistication, complexity and diversity.
It can also be seen that different institutions have realized the value and potential of these Investment clubs and are now providing products that target them as consumers. Despite the increase in investment clubs in Uganda, many are failing due to the following;
Investing can be compared to sports or even war implying that they should have a strategy behind each and every move they make.
The said strategy should be employed from the beginning when choosing which asset class to invest in.
However, most investment clubs fail to implement the strategies formulated by themselves which eventually causes a domino effect that destroys the entire club.
The dream to get rich quick is perhaps the most dangerous thought for many investment clubs to have. Thus, most clubs will end up investing in products that they don’t understand and losing their money through ponzi schemes.
Investment clubs should be wary of getting rich quick schemes and apply the good old saying “Good things take time”.
Your investment club should be treated like your baby. Do you check on your baby once in 3 months? I guess the answer would be no. So, why should you do that to your club? Your club should be monitored from time to time to check on the performance of the different investments.
Lack of investment knowledge can easily lead to collapse of an investment club.
Investment clubs have faced difficulties in the past not because they lacked funds but due to lack of investment knowledge and failure to come up with new investment strategies.
Member commitment is vital for the survival of any investment club. An investment club will only be good as its members therefore if you have uncommitted members in the club then you are unlikely to succeed. The clubs outcomes hinge on how actively everyone in the club participates in the investing decisions.
Any investment club should always set the operating guidelines to be followed by the members. This is because without clear guidelines, some members might end up not making timely contributions which may eventually lead to the death of the investment group.
Many investment clubs have failed due to failure in leadership. In most cases, members of clubs end up appointing people who end up causing turmoil in the group. A good club should have sound leadership that understands the goals of the investment club, the needs of the members and the investment strategies at the time of forming the investment club.
Before you invest, you need to dedicate a good amount of time researching as it is part of an investors due diligence. However, most investment clubs don’t do their home work thus getting their fingers burnt in the process.
Putting all the investment clubs’ money in one asset class posses a great risk to the investment clubs portfolio. This implies that an investment club needs to carefully spread its investments across different asset classes. Diversification should be a priority to every investment club.
Finally an investment club that has goals in line with your financial aspirations and priorities like gaining wealth would be the perfect investment club to go to.
However it is essential that you understand the vision of the investment club as well as the values of the members before you join because an investment club with a vision is different from one that exists without a vision .
Hassan Kitenda is an equity and fixed income analyst.
Email: [email protected]