A Review One Month into the Investment Club

Back in January I made the announcement that I was starting an investment club with some buddies.  We are about a month into it and I wanted to share my initial thoughts, complaints and hiccups, so others can avoid some of the mistakes and problems we are having.

As a reminder, in January I made the decision to try and spearhead the creation of an investment club with 8 other buddies.  While not every member is as close with the other members, I know each very well.  My two brothers are in it, half the members were in my wedding party and the one I have known for the least amount of time (5 years) I work with for 40+ hours.  Each member is smart and hard working.    It has only been a month so far but I am starting to regret my decision.

Problems with Starting an Investment Club

Despite writing that initial post on January 24th, 2013 we did not make our first trade until March 15, 2013.  Nearly 6 weeks of pure pain in the ass headaches.  The problems starting the investment club fall into two categories; broker problems and business problems. Both have lessons one can learn from if they are starting an investment club.

Starting an Investment Club Online Broker Problems

I am a huge fan of my broker, Fidelity, but they really dropped the ball when we were starting the investment club.  I physically walked into a branch with another member with the paperwork they had previously told us we needed.  We thought we were all set up, and waited the obligatory 5 business days or so before checking in.  It was only upon us checking in that we found out that our account was on hold because we were missing paperwork.

The CSR we originally worked with was not apologetic, but said she would send us the paperwork via mail since we didn’t have the necessary $250,000 in assets for email copies! While waiting for it, I contacted Fidelity directly got the paperwork via email (plus more paperwork that the CSR didn’t even mention).  Once I got all the info/signatures needed we were able to trade.  I had it all done before I even received the incomplete paperwork from the incompetent CSR.

Once set up, I have to once again give Fidelity credit – their interface is awesome and I can give everyone inquiry permission without having every member having the ability to trade.

Starting A Business With 8 Partners Has Problems

An investment club at its very core is a business, and anytime you start a business with 8 other members…there will be problems.  Generically speaking, every time you put that many people into a business there will be issues.  Everyone’s personality is different, everyone has different ideas on how a business should be run, everyone will have a different idea as to their commitment level and how much work they want to put towards the business/club.

For example, we had an 8 day discussion on how long people should get to vote on an investment and if they still don’t vote then is it a yes or no?  Then I shit you not, we had people fail to vote on the very issue of non-voting until I texted them to check the board.

Ongoing Problems with Running an Investment Club

Those were starting problems and they are behind us for now, but it is the on going problems that really inspired me to write this post.

Our ongoing problems, even a month deep, is twofold.

  1. Who is willing to do work?
  2. Communication

To date we have done 2 trades, one which I put in about 60-90 mins worth of work very similar to my manual dividend investing watch list screening and the other taking a bear position.  The first investment got everyone going; I showed all my work and even provided the “new to investing members” with definitions of each metric I used.  The second took two separate votes to get through and the second vote, still didn’t have a 100% participation vote, but I got my 6 out of 9 so I purchased the etf.

To date no one else has made a move, and some people do not even visit the private facebook page to make comments on the people who are at least putting ideas to paper (although no follow up).

One month in, I do not have a lot of faith in this club.  As you can tell from the tone of the post, I am pretty bummed.  The members in it are intelligent and all are very hard working in their own right, I am just sensing that this isn’t in the realm of caring for most.  At this point, I got two trades in, I am just going to sit back and see if anyone else takes the reigns for a bit.

How Far We From Shutting Down the Investment Club?

Right now, we are only a month and a half into it, so I would say it would be at least 3 or 4 months out before the conversations start.  While some people are bringing good ideas to the table, they don’t seem to want to do the work to implement them…then we have the other group which has brought really nothing to the table (not b/c they can’t but they just haven’t yet).

11 Responses to A Review One Month into the Investment Club

  1. Sorry to hear that your investment club experience hasn’t started off too well. I founded a small club five years ago and have had tremendous success. I am actually going to start a series explaining the process and experience I’ve had next week.

    Unfortunately, the issue of inconsistent contributions by members is just the way it is. Even in my small club this has been an issue at various times. Something I’ve come to realize, as you are now, is that many people don’t care about their money or investments as much as you do.

    Stick with it, and keep us posted on how things progress, or don’t progress over the next few months.

    • I’d love to read about your experiences – make sure you send them over to me. In 5 years I could be singing the same tune, but right now I am feeling a bit disillusioned.

      “Something I’ve come to realize, as you are now, is that many people don’t care about their money or investments as much as you do.”
      - While I agree you don’t know how much this statement bums me out. When I see family and friends that are just apathetic to their own situation I want to shake the shit out of them…but I don’t even talk to them about it unless they bring it up.

      • “I want to shake the shit out of them…”

        Loved it, and can feel your pain! Like you said, not talking to them until they bring up the topic is the best strategy. I’ve waste more breathe than I would care to waste trying to help people who aren’t ready to be helped.

    • Writing2reality, I would like to read it as well. I have some knowledge about Investment Clubs existence, but how they work, how to start them and organize them I have no clue. And it an interesting topic to me.

    • I am very okay with everyone finding their role as long as my role doesn’t turn into an asset manager with 8 other people who bitch to me when things don’t work out as planned LOL

  2. I am sorry to hear you are discouraged. It’s hard not to get bogged down in details when you are getting set up but people will be more engaged once you start making investments. Don’t get hung up on everyone knowing everything when you start. Clubs are usually about learning. Keep it simple at the start. It’s more important for everyone to feel they can contribute even if they are not an expert.

    A little bit each month over a long time adds up to a lot of learning. I’ve been in a club for 15 years and often feel that I don’t have enough time to deal with preparing for our monthly meetings. But I keep going. Over 15 years I and my other club members have accumulated a lot of knowledge and expertise and our club now does quite well. I don’t think I’d have that if I hadn’t had the regular discipline of having a time on the calendar each month to focus on investing. Since a club meeting is also a chance to get together with friends to share a common interest, it helps to keep the motivation going.

    Feel free to join our community at http://www.bivio.com or at http://www.facebook.com/bivio and post your start up questions to other clubs on our discussion list or timeline. Our clubs are great at sharing their experiences. If you tap into a community such as ours where many are in clubs like you’re trying to start it might help you to keep your motivation strong.

    Laurie Frederiksen
    COO
    http://www.bivio.com

    • “Don’t get hung up on everyone knowing everything when you start. Clubs are usually about learning. Keep it simple at the start.”
      - The level of expertise is not the issue for me its the involvement. I shouldn’t have to pull teeth to get you to comment on where your money is going.

      I’d love to hear more about Bivio and how it could help the club out.

  3. I suspect after your post today it will be read by your buddies shortly and a discussion may be sooner then you think. :) I know if I was one of the eight and I read that I would be calling you.

    Everyone has different investing styles. I preffer stocks that pay dividends. Your partner(s) may preffer growth stocks or ETF’s or alternative investments. With the markets just reaching new highs maybe having a little cash on hand buying in, if there is a pullback is something to think of. (bear thinking)

    Good luck I’m sure you will work it out with some patience.

    • Only 3 of the 8 members know my domain. I try to keep the blog semi-anonymous. Paul, you probably know more about my finances than my brothers do lol!

      It may, in fact, workout – which is why I wanted to get this post out there so I can one day look back and say “slow start but its awesome” OR say “boo, shouldn’t have bothered”

  4. Evan, I am sorry to hear your troubles, but I agree with W2R above mentioning that there are people out there who really do not care about their money and investments. Maybe you should change rules and take fee from the investment or assets in the club (similar to a mutual funds fees) and give the fee to those who do the work. But I do not know if this is legal at all or not. There will always be makers on one side and takers on the other, unfortunately.
    Good reading.

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