Clubs crumble

By TOBY WALNE, CHIEF MONEY REPORTER
Updated:

 

ENOUGH is enough. Battered by plunging stock markets, the four of us in Bradford Old Boys Investments have thrown in the towel.

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After 18 months, we are cashing in what's left of our ravaged investments and spending it on a skiing holiday.

And we're not the only ones giving up on the investment club dream. Just a couple of years ago, more than 300 clubs were being set up every month. Now it is down to 50. Meanwhile 100 a month are calling it a day, reeling from huge losses on the stock market.

Between us, the friends in BOBI, all former students together at Bradford University, managed to turn £2,500 into £1,200 - a feat achieved by 'hot tips' and an unwillingness to offload shares when all the signals were telling us to sell.

Spectacular investment mistakes include shares in technology firm Baltimore, picked up at £650 and now worth barely £40. The only winner has been supermarket group Morrisons, up £60 from a £600 investment this year.

Slumping stock markets are blamed for the closure of most clubs, which have simply withered on the vine because of lack of interest from members tired of seeing their money drain away.

The mutiny at BOBI began last week when club secretary Phil Pickersgill suggested that the £25 a month we contributed would be better spent on a skiing holiday. His idea has now had the thumbs up from all of us. We agree it would be more fun cashing in our chips and taking to the piste with whatever we have left.

The FTSE All-Share index has fallen more than 20% this year, but, like ours, most clubs have fared worse because of their high-risk strategies. Last year, the value of portfolios run by clubs fell an average 15% compared with a stock market fall of 10%, according to figures from share ownership group ProShare. Justin Urquhart Stewart, a director of Seven Investment Management in Mayfair, central London, accepts that clubs such as ours might wish to fold, but he urges other clubs on the point of giving up to consider hanging on.

He says: 'It is a bit boring losing money month after month, and I can understand perfectly well why many clubs now wish to throw in the towel. After all, a key ingredient is that it should be fun.

'But don't feel duty-bound to put club money into shares. There is nothing wrong with siphoning off some cash for treats, such as a good meal, if it boosts the morale of members.'

He says that one of the attractions of a club is that it offers an environment where people can learn about stocks and shares in a friendly setting. Losing money, says Urquhart Stewart, is part of this education. Members should try to match stock market performance with solid investments, rather than trying to beat the market, which often costs them more dearly.

Losing money when stock markets fall is not necessarily a sign of failure. Terry Bond, a director of ProShare, says: 'It might not seem so now, but it is a good time to invest in stocks and shares because shares are cheaper at present.

'Look for firms that have steadily increased turnover, profits and earnings over the past five years. When stock market fortunes improve, the true value of these should shine through.'

Urquhart Stewart believes that clubs should also have a trading strategy, such as taking action if shares rise or fall by 20%. A common failing among fledgling clubs is not knowing when to cut losses and run. For clubs to succeed, members must all pull their weight, sharing a willingness to learn and carry out research on companies.

Investors should not have unrealistic expectations about making profits quickly and must only put in money they can afford to lose.

• ProShare provides an investment club start-up kit for £29.50. Write to ProShare Investment Clubs, 24 Monument Street, London EC3R 8AQ, 020 7220 1760, or visit Proshare

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