Why You Should Join An Investment Club

About 5 years ago, investment clubs were all the range in Kenya. Even I was a member of one. Inspired by the Transcentury story, everyone wanted to join in an investment club, and to “become a millionaire”. However, few clubs have been successful, and it seems today fewer young people are part of investment clubs. I however remain an advocate of Investment Clubs for several reasons:

Strength in Numbers: This is the first and most obvious benefit of investing through a club. Not all of us can raise millions to invest in property.An ideal investment club has 7-15 members, and will contribute Kshs 2,000 per month upwards. This means that even a small club is able to mobilise at least Kshs 14,000 per month, which is much more than the average young person is able to save every month. It follows therefore that a club is able to invest in larger projects, than the individuals would separately. In addition to faster fund mobilisation, working together encourages sharing of ideas, leading to better investment decisions.
“Haba na Haba” is a Swahili phrase that means “little by little”. An investment club makes it possible for you to save small amounts of money you would otherwise waste. One of the reasons most people don’t save is because they have too little cash left over after their expenses; money they can’t really invest in anything, and so they spend it. An investment club is a great channel for small savers. Just to demonstrate, I know a club that was established a year ago, contributing Kshs 2,000 per month, and is on course to purchase land worth Kshs 1 million later this year. When you think about it, Kshs 2,000 is an amount an average young person will spend on entertainment in a weekend.
Discipline and Commitment: Few people have the discipline to save up for years on end in order to buy an asset such as a house. Most of us give up every few months and spend the money, or saving goals keep changing as time goes. Being part of an investment club creates discipline and consistency in one’s saving habits, and the inaccessibility of funds once contributed makes It harder for one to give up mid-way. Most clubs as we’ll see in the next post have clauses that penalise members for late contribution, non-contribution and exit, while others have loan schemes that allow members to borrow their savings at an interest. These measures ensure that even before you pay your bills, you have met your club obligations, one way of “paying yourself first”.
Networking: An Investment Club is a great way to meet people with whom you have common interests. In addition to this, by registering as members of the Kenya Investment Groups Association or other such groupings, the members get great opportunities to meet with other clubs’ members and exchange investment ideas.
Risk Diversification: Investing with a club helps you reduce investing risk (the chance of losing part of most of the investment). All investments have a measure of risk, some higher than others. The fact that each member owns just a small portion of each investment owned by the club makes it harder for a member to lose his/her entire investment, compared to if one invests as an individual.

There are other benefits of being part of an investment club; socialisation, a great opportunity to develop leadership skills and many others not enumerated in this post. Are you a member of an investment club? If yes, has your club helped you meet your investment objectives? If not, why aren’t you a member of an investment club?

Look out for the next post on dangers of being part of an investment club.