Ok, I've promised to get the idea of an investment club kickstarted again in the new year so let me begin by recapping on why I think this is a good idea for imutual and how I would prefer it to work....
My primary objective is to help attract and retain imutual members by offering a unique payment option i.e. the ability to drip feed your cashback earnings into equity-type investments. By doing so, you have the potential to generate better returns than you would be just putting in a bank or savings account. Of course, there is no guarantee of that and such investments inevitably involve an element of risk. The old adage says "Don't invest what you can't afford to lose" but that's precisely why cashback, which most people tend to treat as a bonus, is an ideal source of funds for investing.
Additional benefits would be:
- To learn more about investing and investment clubs
- To have enjoyable discussions and decision-making with fellow members
The club would be a separate legal entity from imutual PLC, run along similar lines to other UK investment clubs. This means that once your cashback has been paid into the club, imutual PLC has no further responsibility and your funds are under the control of the club in accordance with its rules and members' decisions. On the plus side, that also means your money is safe in the highly unlikely event that imutual PLC runs into financial difficulties.
Given that there is already a "share ownership" element to imutual, it seems reasonable to assume that our members (both current and prospective) would have a greater appetite for an investment club than your average citizen. I know that many of you have already expressed an interest in this when it was first outlined, but I want to be clear that I'm only interested in devoting time and resources to the idea if it works to the overall benefit of imutual. Hopefully all of you will also share that sentiment, so here's how I'd want it to work:
- There is no limit on the total number of members (other than that imposed by law)
- Anyone can join, provided that they create an imutual account and make modest initial and ongoing contributions (see here
- Decisions are made on a one-member one-vote basis regardless of how much each member has invested
- The rules should be set so as to minimise the burden of administration e.g. "meetings" to be held online, each member responsible for providing personal ID directly to the bank/stockbroker.
- It's impractical for such a club to be able to make quick decisions, so the investment strategy should tend to favour medium term "trends" rather than ad hoc "share tips". This is up for discussion of course, but Index trackers and ETFs might be more appropriate than individual stocks
- I'd like to see "member reputations" developed as a key part of the decision-making system i.e. over time, each member can establish a statistical "rating" based on their historical votes and recommendations.
- We should accept that some members will be a lot less active in club discussions than others, and the Club Rules should allow for this to the greatest extent possible (subject to the regulations surrounding investment clubs) - provided that they meet the minimum contributions.
- If a member becomes "inactive" (e.g. not voting/posting/paying in within a given period) or otherwise breaks the club rules, the treasurer will be entitled to close their account and return their funds (minus any admin costs stated in the club rules)
- Members will use the imutual forum to discuss club business and, as far as possible, these will be held on an open forum (in order to help promote both the club and imutual itself)
- I am happy to take one of the three officer roles initially (chairman, secretary, treasurer) but other volunteers will be needed and I don't guarantee to continue in one of these roles indefinitely.
Once up and running, there's nothing to stop more clubs being created - perhaps to cater for those with more adventurous approaches to investing. But I'd prefer our main club to be fairly cautious, easy to administer and to aim for a modest "better than a building society" return.
Hope this doesn't come across too much as me making demands, but I just want to make sure that if we all put in the effort required to get such a club off the ground, it gives the hoped-for boost to imutual with creating an administrative burden. If we run it in the way outlined above, we could really create something huge - the first UK investment club with thousands of active members (the law now allows more than 20). And that would generate some great publicity
Let me know what you think!