How many times have you had to bite your finger at the disappointment of passing up a business opportunity for which you were financially ill prepared to take advantage of? Occasions probably too numerous to count I am sure.
Compounded to your seeming frustration might also have been the fact that a purposeful walk into any of our Nigerian banks lends no reprieve as most would gladly dance naked in the simmering Nigerian heat or unforgiving torrential downpours than take a second look at your well prepared business plan. Your savings just won’t cut it, plus, it also seems, unfortunately, like other avenues of independent fundraising in a bid to benefit from that seemingly ‘hot’ business opportunity looks abortive from every angle.
Well, maybe there is one angle you failed to consider, and guess what, it’s one that enjoyed huge popularity at some point in the Nigerian business space. A casual discussion about it with a friend once lent the near heated response, “Investment Clubs are dead abeg! Let’s think of something else…” he said to my utter wonderment. Really? I mused, are Investment Clubs really dead or did we just see it as a passing fad which we were only too glad to drop at the first sign of ‘bump ahead’ we came by?
And now we scratch, unsuccessfully so, too far down the ‘well of opportunity’ for fundraising solutions that stares us right in the face? Hmmm, maybe it’s one or the other or it’s neither, but did you know that the Paris Club for which Nigeria and several other African and global nations always enthusiastically run to for financial aid is actually an informal group of 22 creditor nations, with no official global statues, who give concession–based loans to mostly poor nations.
And are today owed monies to the tune of half a trillion dollars by more than 50 global nations? I can’t even begin to imagine what could happen to the global economy if this group ever decided they needed all their monies, plus agreed interests, back. In other words, it would be bad news for the world, and good for the creditor.
Believe it or not, the Paris Club is one of the highest forms of Investment Clubs there is in the world today, and though there may be others, such as the London Club – a private group of creditor banks that also loan monies to countries and other banks, the Paris Club is one of the oldest, most successful and popular Investment Clubs in the world.
Of course, there might never be anyway that you or your entire village could together ever match the kind of investments that has seen Paris Club rise to the pinnacle of global financial prominence as it has today, however, might the idea be one channel to reach your goals of financial independence without the hassle of loan repayments, displeased shareholders, a greedy creditor and/or some form of indebtedness for which you could have future regret? Maybe…
Alright then, let’s delve a little deeper into this financial crevice and reeducate ourselves about this once forgotten money spinner and see if it could have some exploitable hidden gems.
What is an investment club?
An Investment Club is a group of individuals who come together to combine funds mostly for the purpose of investments, and with positive returns as an outcome. These members typically meet on a periodic basis to make investment decisions, mostly through, a voting process and then proceed with their investment objective(s). Investment Clubs are an excellent way of reducing the risk of financial losses, in the case of a bad investment decision, and are also good ways of meeting new friends and learning of new investment opportunities that exist and having a means of easily taking advantage of them.
Although people have been investing in groups for thousands of years, the world’s first investment club was allegedly established in Texas in 1898 back in the Wild West when few investments could be considered safe. Investment clubs were seen as an ideal way of spreading the risk away from just capitalizing in cattle farming, the popular business at the time. And one of the major reasons people, particularly Americans come together in investment club is to learn how to or other ways of investing their own personal monies outside of the group.
It is important that each Investment Club have ground rules, strict laws that must be abided by each and all members, a solid strategic business direction and firm investment objective and procedures otherwise its objective could be defeated from the get–go. Usually Investment Clubs do not have to be legally registered or offer or sell membership slots to interested persons, but most do and since each club is unique, each should, for best practices register at least as a private entity, a social club or find ways to abide by some statue governing the laws of the land which it finds itself.
Investment Clubs can invest in next to anything, both legal or (believe it or not, illegal). But the most popular, legal, vehicles are shares (stocks), mutual funds, bonds, treasury bills, property, junk bonds and direct investment in ownership of companies. However, other Clubs have been known to stake in big oil and gas deals, farming/agricultural projects, next–generation pharmaceutical and/or medical solutions, weapons manufacture and sale, to mention but a few.
How to join an investment club
Joining an Investment Club may require a connection to an existing member or a vacancy in the club, but any group of individuals may start their own investment club. The process includes finding a group of like-minded investors, registering it with state and/or federal government, obtaining a taxpayer ID, and holding regular meetings. The investment club should also open a brokerage and banking account and maintain organized and strict banking and accounting procedures.
Investment Clubs are commonly formed as partnerships or limited liabilities, and investment income and/or losses are consequently passed through to its members through monetary or physical terms as agreed by its members.
Contributions into investment clubs
Some Investment Clubs are gender or age specific and members may be required to make an initial minimum investment and then make regular contributions as agreed in its membership terms and conditions. Often, but not always, each member of the investment club contributes the same amount of money and is expected to do so periodically. Members are often always free to invest outside of the club, which makes an investment club a good way to diversify a portfolio.
Club meetings are usually held monthly but some Clubs meet more frequently, and most meetings involve reviewing existing investments, taking deposits for new investments, selecting new investments opportunities, and on some rare occasions, as a festive gathering. Members personally research existing and potential investments, and the group is often able to conduct more thorough research as a team than each member could do individually. A majority vote is normally required to buy or sell an investment, making it one of the safest investment options known to man…
To be continued…
About the Author
Whenever he is up nights, faffing around the internet gathering material for detective novels he is not sure when he’ll ever publish, Brain Essien, likes to play investment and brand strategist in the mornings and website architect/builder in the afternoons. On the weekends he likes to throw on a few bouncing apparels and gadgets and go bounce people out of their own parties if they become a handful. Besides that, he loves reading detective novels, building muscle, daredevil racing, video games, shad