When was the moment you discovered the wisdom in investing and decided that Investment Clubs were worth paying attention to as your gateway to financial freedom? Were you prompted by the realization that you have been working and earning an income for several years, but have no tangible assets to show for it, or was it merely the need to increase that income?
In an Investment Club, several people pool their money and invest it into whatever ventures they deem profitable.
I think this the smartest way to start investing because here, one can take advantage of the power of many. More money opens the door to bigger and better opportunities. It reduces the burden of risk involved while increasing the profit margin. There is limited regulation governing how these groups are assembled, making anyone who is interested eligible to join or create one.
In an Investment Club, several people pool their money and invest it into whatever ventures they deem profitable. I think this the smartest way to start investing because here, one can take advantage of the power of many. More money opens the door to bigger and better opportunities. It reduces the burden of risk involved while increasing the profit margin. There is limited regulation governing how these groups are assembled, making anyone who is interested eligible to join or create one.
Needless to say, there are as many expectations as they are members of the Club; expectations formed within the context of individual members’ experiences, biases and knowledge. These expectations do not always align with the reality of what goes on within an Investment Club.
The first expectation people tend to have about Investment Clubs is that because members have a common goal, there will always be consensus. Most Investment clubs are formed within existing networks of friends, family or work colleagues, and it is easy to assume that everyone will have the same mind about issues along the way.
However, when people’s livelihood is at stake, tensions tend to rise high. If no guidelines exist to govern the process of agenda-setting and decision making, the group will very likely come apart before anything of note can be achieved. Therefore it becomes a top priority for any Investment Club to develop an operating agreement right at the formative stages.
The club members need a constitution to streamline the governing structure. It will make it so much easier to navigate conflict along the way. Right from the beginning, the Club must be intentional about establishing each individual’s aims and objectives. Everyone’s expectations should be realistic and must be compatible.
The agreement must address questions like:
The second expectation might be that you can now quit your “day job”. People mistakenly assume that successful investments do away with the need to work and earn an income. If you invest wisely, you will be able to retire earlier and more comfortably than your current job might make possible.
However, you very likely will not become rich overnight, so do not walk away from that stable stream of income just yet. Stories about people who have had immediate “astronomical” success are few and far between and are the exception to the rule. Always bear in mind that it requires patience to be a good Investor.
A third expectation might be that Investing is like gambling. However, this could not be further from reality because there is a “method to the madness”. If you educate yourself about trends in the market, you will find that there are ways to mitigate risk when investing.
However, you very likely will not become rich overnight, so do not walk away from that stable stream of income just yet. Stories about people who have had immediate “astronomical” success are few and far between and are the exception to the rule. Always bear in mind that it requires patience to be a good Investor.
Understanding market forces enables one to assess the value in any investment option and streamlines the decision-making process. The most successful investors are certainly not gambling their money away. Instead, they invest in carefully chosen companies, properties and businesses that have a high probability of delivering sizable sums in the long run.
Some members might also expect that an expert investor will come in to advise or make all the decisions of the Investment Club. But the reality is that for the most part your Investment Club is only as educated as its members. Even when expert advice is sought out, it still falls to the members to decide which way the Club invests.
Finally, a common expectation people tend to have is that once Investment begins, saving stops, but this is often not the case. When you join an Investment club, you generally have to pay upfront or save for a while to make the Initial Investment. After the Initial Investment is made, members continue to pay a specific amount regularly, which will be invested in the portfolio.
Some members might also expect that an expert investor will come in to advise or make all the decisions of the Investment Club. But the reality is that for the most part your Investment Club is only as educated as its members. Even when expert advice is sought out, it still falls to the members to decide which way the Club invests.
Finally, a common expectation people tend to have is that once Investment begins, saving stops, but this is often not the case. When you join an Investment club, you generally have to pay upfront or save for a while to make the Initial Investment. After the Initial Investment is made, members continue to pay a specific amount regularly, which will be invested in the portfolio.
The Ugandan government wishes to transform Uganda into an upper-middle-income country by 2040. The surest way this goal can be attained is if we address the problem of unemployment, by increasing the capacity for self-employment. Ugandans and their proclivity for entrepreneurship has been well documented earning the top spot as the most entrepreneurial country in the world twice; the first time was in 2003 and then more recently in 2015. However, we cannot celebrate just yet because over 41.1% of MSMEs in the country fail within the first two years. Moreover, it has been reported that for every three Ugandans that get out of poverty two fall back in.
In 2016, the Uganda Investment Authority recognized Investment Clubs as the Alternative funding for MSMEs. This statement mirrors the growing trend that has resulted in an explosion of Investment Clubs in Uganda over the last decade. As of 2019, the Investment Club Association of Uganda estimated that there were over 8,000 Investment Clubs in the country. A remarkable statistic which indicates that the Ugandan population is becoming increasingly aware of the vital role Investment Clubs play in our economic development. It is imperative that Ugandans position themselves and each other to succeed in business. And what better way, than to take advantage of the power of many in the Investment Club.
Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
The Microfinance Transparency report from 2011, lauded Uganda as the most vibrant microfinance industry in Africa. Yet, despite this success in Uganda as well as many other African nations, poverty levels within the population would indicate that the job to ensure economic inclusion is far from over. Microfinance institutions are organizations that provide loans to low-income […]
In any Investment Club, there is likely going to be a whole lot of movement of cash. Any money dedicated to covering the operational costs of the Club and its investments: from administrative needs to the payment of suppliers and staff, needs to be managed appropriately. It is of utmost importance to the survival and […]
The word Fintech is being used in discourse more and more every day, which should not come as a surprise considering the scope of its definition. Still many of us outside the financial sector remain unfamiliar with this phrase, so I will explain it. Fintech is simply the abbreviated way to say Financial technology; a […]
The Microfinance Transparency report from 2011, lauded Uganda as the most vibrant microfinance industry in Africa. Yet, despite this success in Uganda as well as many other African nations, poverty levels within the population would indicate that the job to ensure economic inclusion is far from over. Microfinance institutions are organizations that provide loans to low-income […]
In any Investment Club, there is likely going to be a whole lot of movement of cash. Any money dedicated to covering the operational costs of the Club and its investments: from administrative needs to the payment of suppliers and staff, needs to be managed appropriately. It is of utmost importance to the survival and […]
In the article concerning the expectations and realities of Investment Clubs, we pointed out that Uganda has witnessed an exponential growth in these associations over the last decade. The Capital Market Authority places the number of Investment Clubs at over 8,000. Despite this growth spurt, a good number of Investment Clubs do not survive in […]
When was the moment you discovered the wisdom in investing and decided that Investment Clubs were worth paying attention to as your gateway to financial freedom? Were you prompted by the realization that you have been working and earning an income for several years, but have no tangible assets to show for it, or was […]