According to the Uganda Investment Authority, an Investment Club is a group of fewer than 100 people who pool their money to invest in ventures they deem profitable. A clear enough definition, wouldn’t you say? Still, there is a lack of ample conversation surrounding how exactly these organizations are run, or how they can benefit society. Because of this lapse in knowledge, people’s perception of Investment Clubs is often inaccurate. 9 of the most misunderstood facts about Investment Clubs are explored below.
1. Investment Clubs are get-rich-quick schemes. People may have a pre-existing bias against Investment Clubs because get-rich-quick schemes are sometimes marketed as Investment Clubs. Pyramid scheme promoters and multi-level marketers often target closely-knit groups such as religious or social organizations, student unions or sports teams trying to pass off their scheme as an Investment Club.
1. Investment Clubs are get-rich-quick schemes. People may have a pre-existing bias against Investment Clubs because get-rich-quick schemes are sometimes marketed as Investment Clubs. Pyramid scheme promoters and multi-level marketers often target closely-knit groups such as religious or social organizations, student unions or sports teams trying to pass off their scheme as an Investment Club.
2. Investment clubs are a fast way to lose money. This view is often held by people who think of investing as gambling. However, most investment clubs are relatively conservative because the stakes are higher and affect more people. Clubs that are smart about their strategy will always make more money for their members, even if it does not happen immediately.
3. Participating in an Investment Club can wait till you are wealthy. People often think that you need to be wealthy to be an investor, but the irony is that one usually becomes wealthy through investing. Invest early and often to build wealth. Besides, each Investment Club decides its fees according to its members’ ability to fulfil the terms. Sometimes they choose to pay the same fee across the board, while in other cases, people contribute different amounts to the Club and therefore are entitled to different returns.
3. Participating in an Investment Club can wait till you are wealthy. People often think that you need to be wealthy to be an investor, but the irony is that one usually becomes wealthy through investing. Invest early and often to build wealth. Besides, each Investment Club decides its fees according to its members’ ability to fulfil the terms. Sometimes they choose to pay the same fee across the board, while in other cases, people contribute different amounts to the Club and therefore are entitled to different returns.
4. You need to be an expert economic mind to belong to an Investment Club. However, Investment Clubs are terrific places of learning owing to the networks they afford their members. More so, a Club with 12 members doing research is bound to provide a faster learning curve than what any one person could manage alone.
5. Entrance into an Investment Club is by invite only. This is not true for two reasons; one is that anyone can start an Investment club if they so desire, provided they can mobilize the quorum and subsequent funds for Investment, and stay diligent about educating themselves and partners about the market. Secondly, one can approach the board of the Club and ask to join the group. If there is unanimous agreement in the membership, they will welcome the new member.
6. Everyone is honest, and there’s no need for checks and balances. Even if you personally know everyone in the Club, it is a good idea to install some security measures so that one person cannot run off with everyone else’s money. Requiring two signatures on any check from a joint account is just one way of getting around this dilemma, or hiring professionals to manage the accounts. Finessed processes will dispel the myth that family and friends cannot be in business together.
7. The members always agree about where and how to invest. Club members usually disagree about investment choices, but this should not discourage anybody because constructive disagreement (discussion) yields a lot of good: helping the members understand the market and make the most educated decisions. Whatever, your area of expertise, there will likely be someone else who can challenge you or another that knows plenty more about a sector with which you are unfamiliar.
8. They are an unnecessary hassle because people are better off making investment decisions alone. This is not true. There certainly is a “group intelligence” that can emerge in well-organized investment clubs. One person might be an expert on precious metals, for example, while another knows the stock market quite well. Pooled intelligence is one of the critical advantages of investment clubs.
9. Investment clubs are all business. However, a significant selling point for Investment Clubs is that they also function as social organizations and can place their members within pretty enviable networks. Additionally, many Club members tend to have been social acquaintances or even friends before the Club’s formation. Meetings often happen in informal spaces like restaurants or church buildings. For people who like to get together with their friends and talk about the market, joining an investment club can be a great idea.
I will conclude by saying that I think it is essential to quash any misinformation about Investment Clubs; because once we better understand Investment Clubs, more and more of us will seek them out. And in the current economic climate, we cannot afford to waste any opportunities for wealth creation.
Uganda’s economy has experienced a slowdown in growth due to the severe impact of the COVID-19 pandemic crisis, a locust invasion and flooding caused by heavy rains. Uganda’s gross domestic product in 2020 was projected to be between 0.4 and 1.7% compared to 5.6% in 2019. Exports, tourism, remittances, foreign direct investment, and portfolio flows shrunk during the second half of the fiscal year of 2020 due to international trade disruptions and movement restrictions.
Uganda’s economy has experienced a slowdown in growth due to the severe impact of the COVID-19 pandemic crisis, a locust invasion and flooding caused by heavy rains. Uganda’s gross domestic product in 2020 was projected to be between 0.4 and 1.7% compared to 5.6% in 2019. Exports, tourism, remittances, foreign direct investment, and portfolio flows shrunk during the second half of the fiscal year of 2020 due to international trade disruptions and movement restrictions.
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