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).