The Investment Club

What up what up!

Have an awesome idea to share with you today :)

It comes from Ugo Chiulli who entered our t-shirt giveaway the other week saying he wanted the “Index and Chill” shirt to rock at his investment club, and as soon as I heard those two words together I immediately begged him to write something up for us!

And he complied! Thanks brother!

Here’s what he sent me below… Such a fantastic idea – we need one of our own!!

******

J. Money,

I’m writing to follow up telling you about how a group of guys that wanted to buy some property as an investment ended up starting an investment group.

A friend of mine (who’s name is actually J – yes, just the letter J) is part of a group of guys that went on “annual guys trips.” During these trips they discussed buying property as an investment. They soon discovered that they’d need more money than the “spare money” they had laying around to be able to actually buy property.

Not losing focus, they decided to start an investment club where they would continually pool their money together monthly and invest. They use online platform Bivio to track it all, and got a lot of help from the book, “The Millionaires’ Club: How to Start and Run Your Own Investment Club and Make Your Money Grow.

Two of the members had some experience in trading stocks and so they decided to invest their money up front into the stock market. The goal always being to buy property. They met for a few months and came up with an Operating Agreement and By-Laws.

The monthly buy in was (and still is) $150/mo per member. There has been a consistent 12-14 members. Additionally, the mentality was to be that the monthly buy in was EXTRA money that would not be missed in the extreme case where they “lost everything”. Money where they could experiment with investments, take risks and not worry.

That’s how the Investment Club got started.

The goal of the monthly meetings is to present one or two stocks to consider investing in. Members alternate presenting. Investments are voted on. Votes for IF to invest and HOW MUCH to invest are had. Various investment strategies are also reviewed and tested. Additionally, all investments are reviewed on their acquisition anniversary to determine if the investment still fits our portfolio needs. Votes are held whether to sell or keep investments on review dates. ALL decisions are made via vote.

One funny story is that on their FIRST meeting, the first presentation was for a stock (DEK) that was “vetoed” for purchase but ended up being a HUGE winner over time. The group constantly references that missed opportunity.

For the first few years they weren’t fully invested. Often having as much as 50% in cash. They also bought and sold based on unrealistic goals and on emotion. Reflective reporting showed that “tons” of money was lost by selling too soon (often when the market was down but then went back up, and higher than original). All in all, they did OK though.

I joined the group 3 years after they started (about 10 years ago). I was recruited by J. We work together. I was no investment pro, but did have about 20 years of various investment experience. He thought I might be a good addition to the group. I like to think I am too :)

Since joining we’ve gotten ALL money invested. I’ve gotten tons of exposure to stocks presented by members that I’ve added to my own portfolio. I’ve contributed by helping make changes to the By-Laws and Operating Agreement for the betterment of the club.

Stock selection is up to individual members. Various sources are used:

  • The Little Book That Beats the Market” by Joel Greenblatt — the book that helped us select our first investments and strategy to follow before we started creating different portfolios with other strategies.
  • A Random Walk Down Wall Street” by Burton Malkiel — a great read for setting investment expectations and providing a proven and consistent way to get steady returns that MATCH the market performance.
  • Motley Fool’s investment services — provides a steady stream of suggested stocks and material showing why recommendations are made.
  • TREFIS — a good tool that shows relative stock value and stock’s value makeup that provides a great comparison to current prices.
  • The Only Investment Guide You’ll Ever Need” by Andrew Tobias — provides an awesome A to Z explanation of what you need to know about investments (from piggy banks to stocks markets).

The group began to flourish (thanks to an awesome investment environment in the last 10 years). We had actually reached about $500K in value about 5-6 years ago. We now finally began to look into Real Estate opportunities. We looked mainly at private REITs (Real Estate Investment Trusts). None met our needs… until the last one.

I introduced the group to a Real Estate investment opportunity that we felt met our needs. Buy in was $100K with a 4-5 Year Investment time frame. It provided for a 6% distribution that is paid monthly. Investment target is to achieve 2 times on original funds at time of investment sale.

Additionally we’ve invested (via FundRise) in a small business as well as a much smaller commercial REIT.

At the height of the market about a year or so ago, the group’s valuation reached $1 Million! Not bad!

We’ve since gone through some changes. We’ve had two members resign (friendly resignations), and one member sadly passed away. The market also has turned down. We’re a smaller group but still very viable!

The best is yet to come!

– Ugo

PS: Below is a rough outline of our meeting agenda. While the group has evolved as have the investments, the monthly meeting remains the same:

  • Check-in and approval of minutes – 5 MIN
  • Treasurer’s report – 15 MIN
    • Review “moves made” in prior month
    • Review all account balances and purchasing power
    • Review all past due accounts (late payments)
  • Review our stocks/holdings – 15 MIN
  • Review stocks up for Annual Review
  • Old Business – 15 MIN
  • New Business – 30 MIN
  • Assigned Presentations
  • Announcements
  • Adjourn meeting
  • MAKE MONEY!

******

How awesome, right? Not only for potential income, but for all the camaraderie and learning experiences and really just the ability to hang out with people who “get it” and are actively working to improve themselves! Such a rarity I find offline, and what a blessing to have that many people around you invested in such a thing. (No pun intended)

Also – love that all the club contributions have to be “extra” money too so you’re not playing with core savings and regret anything. I’d 100% join a club like this if there was one set up in my hood… $hit, I’m halfway tempted to even start one right now myself after reading about this! It’s the perfect social club!!

And I think for people like me who are so stuck in their indexing ways it would help force me to be more open to other strategies and opportunities out there too… But really I just think it would be fun as hell getting together every month and talking shop with friends!

So thanks Ugo! Appreciate you taking the time to write all this up, and answering my 101 follow up questions :)

If anyone else has any, or would like to share their own experiences being a part of such a club, comment below so we can all learn from it! Happy investing!

j. money signature

PS: I’d make my Investing Club a “drinking” club too where you have to bring a 6 pack of beer or bottle of whiskey to each meeting for others to enjoy ;) But you couldn’t start drinking until after the presentations/debates so nothing gets too cloudy, lol…

*Links to books above are Amazon affiliate links

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14 Comments

  1. Jennifer October 17, 2022 at 7:02 AM

    I’d be interested to hear how the club handled, financially, the resignations and the untimely death?

    Reply
    1. Ugo Chiulli October 17, 2022 at 8:36 AM

      Jennifer, and anyone else that may have specific questions… happy to answer them here. If you think a conversation would be better… feel free to email me at ugochiulli@yahoo.com.

      Whenever a member needs to be paid out, there is a “resignation date” determined. Typically it is the date of the next meeting after the member resigns. Death is classified as a resignation in our By-Laws. From that date, we have up to 6 months to pay out the member. We typically set up a “liquidation” committee to identify the valuation as of the resignation date. They then come up with recommendations of HOW the member will be paid out… typically involving setting aside any existing cash to use and identifying specific assets to sell. All actions need to be voted and and approved at a subsequent meeting.

      Our Treasurer then carries out the approved payout plan.

      I hope this helps.

      Reply
  2. Financial Fives October 17, 2022 at 1:53 PM

    I like the idea of doing something that can improve your life while also being social and having that camaraderie! We’re a disconnected and isolated society in many ways, and ever since work from home took off, it’s gotten worse.

    Sure you could read blogs like I am doing right now (and plan to continue doing) but the in -person or close-knit collaboration adds both monetary and non-monetary value.

    Reply
    1. J. Money October 17, 2022 at 4:18 PM

      100%.

      I’d join one just for the face-to-face action with like-minded folks!

      Reply
  3. Jim October 18, 2022 at 10:53 AM

    Fantastic post J! What a way to meet like-minded folks and grow a portfolio. I often thought about doing this with young people to try to get them into investing at a young age, but haven’t gotten that off the ground yet, maybe this will be my motivation. Thanks for sharing!

    Reply
    1. J. Money October 18, 2022 at 6:01 PM

      If you do, you’ll have to let us know about it! I think it would be even *more* helpful for the younger gen…

      (Though you may have to lower the “buy in” for membership dues 😎)

      Reply
  4. J "from the club" October 18, 2022 at 7:44 PM

    Thanks for sharing our story J. Money!

    I’m the ‘J’ that Ugo mentioned in the story and just wanted to add that we started selecting our investments by using “The Little Blue Book That Beats The Market” by Joel Greenblatt. It helped us to have a strategy that we all agreed to follow before we started creating different portfolios with other strategies.

    Appreciate your content and feel free to reach out if you have any other questions. Thanks!

    Reply
    1. J. Money October 19, 2022 at 7:16 AM

      Hey! Thanks for stopping by the site and congrats on all the success so far with the club! Super inspirational! Went ahead and added that book into the post so others can find it and hopefully be helped by it too… Y’all are awesome.

      Reply
  5. Kalen Houck October 22, 2022 at 4:52 AM

    Love this idea! I’ve never thought about investing in a group before. I’m sure it presents some unique challenges, but it seems like it would have way more pros than cons when considering the value of the “mastermind”.

    I’m also digging your idea about bringing a bottle of whiskey for post-meeting conversations :)

    Reply
    1. J. Money October 24, 2022 at 9:50 AM

      The whiskey could work for any type of meetings, really ;) Should be mandatory, in my book!

      Reply
  6. Rita October 26, 2022 at 2:31 AM

    Hi J.,

    Yes, start an investment club. I’d like to be in it. We could do it by Zoom.

    Reply
    1. J. Money October 26, 2022 at 7:26 AM

      Adding you to the list if it ever comes to fruition! :)

      Reply
  7. Ugo October 28, 2022 at 4:26 PM

    I will also add that in starting an Investment Club the group would need to set a mindset as to whether they are going to act like a business or a club. These are totally different mindsets and could lead to differing By-Laws and policies.

    We started ours more like a business, but I think we act more “club-like”. I think it would be beneficial to decide up front.

    Lastly, in setting up an investment group, the members gain what it is like to start a business and what it is to maintain one. GOOD skills to have in life!

    Reply
    1. J. Money October 31, 2022 at 6:56 AM

      yes! great points on both!

      Reply

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