Back in 2013 I started an investment club with a bunch of friends, and much to my surprise we have officially past the 3 year marker last month! The club was not created on a whim, amazingly enough, I found in my archives that I discussed the topic WAYYYY back in 2008. Imagine the returns if we started then? The implemented idea was simple enough, everyone would put in $500 to start and then every month thereafter $100 would automatically be transferred from our individual bank accounts to our investment club account. The consistent and automatic $100 was one of the most important parts of the whole plan. We would then grow together as investors collectively making investment decisions.
Investment Club Results from Inception
According to Fidelity our account was established on February 28, 2013 and since then the balance looks like this:
Our gains are the spread between the yellow and the blue; impressive, right? You can’t look at the pure numbers in a vacuum. How we do has to be compared to some type of index, a constant that says what if we didn’t invest it at the whim of our members. Well the yellow can be looked as cash, but that isn’t entirely fair since everyone’s $100 may have ended up “in the market.” Luckily, fidelity provides some great information for me:
|as of 03/31/2016|
|Value – $41,170.67|
|Compare Your Returns to the Market ***|
|Blended Index: Most Aggressive||-0.25%||-2.77%||27.54%|
|Blended Index: Aggressive Growth||0.31%||-1.90%||24.83%|
|Blended Index: Growth||0.67%||-1.23%||21.33%|
|Blended Index: Balanced||1.20%||-0.34%||16.98%|
|S&P 500® Index||1.35%||1.78%||39.82%|
|Barclays U.S. 3 Month Treasury Bellwether Index||0.08%||0.14%||0.27%|
|Barclays U.S. Aggregate Bond Index||3.03%||1.96%||7.69%|
Regardless of the marker you want to use, we have absolutely beaten the market thus far. I am not delusional, and I know that most of our gains are based on luck rather than skill. Getting in and out of an equity takes being right twice, and some how we have flipped that coin in the right direction a few times. Notwithstanding, we are sitting with some pretty big losers in the account currently and just haven’t realized those losses yet (alternatively, it is my hope that some of those stocks come back with a vengeance).
Investment Club Information Beyond the Money
It only took about a month before I started complaining about the involvement level. Since then there have been 3 emails sent out to the group members about the topic. It is hard to keep everyone as excited as I am about the topic of investing, so there are obvious highs and lows. That being said as of this post we are riding high w/everyone’s involvement.
When we first started we were using Facebook groups, but a couple of the guys were bitching about having to go on to Facebook, so when I discovered Slack and what it could do I knew it would be a great move. We are now using Slack to communicate and it has worked out really well.
Since the beginning of the club we have had 9 members no one has joined or quit, which is nice since I have a personal relationship with each of the guys. While they may not be all connected to one another, I act as sort of the nexus of the group. We decided early on that it would take 6 votes to buy or sell.
Investment Club Future
8 out of 9 members wanted to get more aggressive (I was the lone holdout). However, there was some confusion on what that actually meant. There was a discussion of taking on leverage (i.e. margin debt). I made it clear that I would not be involved with such risk. I have no interest in trying to collect on a margin call if shit hits the fan. There was talk of real estate investing. Those pushing for it were not talking about fun ohau real estate, but rather a multi-family house probably in a county or borough where a lot of us live. I highly doubt this will ever come into play. I can’t imagine the hell that it would be having 9 people own one piece of property. In the end we decided on two initiatives for 2016+:
- Focus on bigger purchases – as of this post we hold 28 positions with only ~$42,000. Making our average holding only $1,500 (the median may even be lower since we do have some concentrated positions). This turns us into a mutual fund when people want to be more like a concentrated hedge fund. Going forward we are going to go more aggressive on the purchase amount.
- Work together to get into the options market – I used to be a big fan of covered calls and even used a put to bet against a stock once, but that is where my knowledge official ends. We are going to work together to educate each other on different option strategies.
While I don’t think we’ll actually start using options as an investment strategy, I am not against it. As far as the second initiative, I think it will naturally occur as we get bigger and bigger (Why invest $500 when we are worth $50k, or $2k when we are worth $100K).
I hope I am writing these updates for years to come, but I am not sure what will happen when people see a bear market! We have had the luxury of starting this investment club in the middle of an unprecedented bull run. Only time will tell.
- One Month Investment Club Update
- Nine Month Investment Club Update
- One year Investment Club Update
- Two Year Investment Club Update