My presentation to the club Optimus led me to think about the following. How and why can any investment club survive without interruption for 77 years (from 1932 to 2009)? What is its magic recipe? Is it because of superior returns (outperforming the market) over such a long period, or does the answer lie elsewhere?

Introduction

Investment clubs are groups of individuals bound by a common interest in personal investing. There are a number of investment clubs in Canada. All must comply with the requirements of Canadian securities commissions (see policy doc.1201) and of Revenue Canada doc.1203E. In the USA there is an association (National Association of Investors corporation) which includes a large number of investment clubs. However, investment clubs are less prevalent in Canada and it seems to be unusual to find a club that lasts more than a few years, making the case of Optimus particularly interesting.

For general information about investment clubs in Canada, the USA and elsewhere see:

• Revenue Canada doc.1203E
• Investors Association of Canada
• ShareClubs-Canadian Money Saver
• The SEC 
• National Association of Investors Corporation
• SmartCookies Club doc.1204
• Investment club softwar- Wikipedia
• Motley Fool
• Investopedia
• Wikipedia
• England Proshare Investment Clubs
•  London Stock Exchange and clubs

Becoming a self- investor

You will find here doc.426OPT the full text of my presentation. In it I summarize and compare the factors that promote a do-it-yourself approach to investing to the characteristics of investment clubs. All Optimus club members (this is probably the case for virtually all clubs) all have their own personal portfolios. Does club participation help make you a better self-investor? In general, see Independent investing: five prerequisites on our site.

Here are some of the characteristics of investment clubs that seem to favor the prerequisites for being an independent investor:

• A long-term horizon: obviously, we can say that 77 years represents a long-term approach to investment, the first prerequisite of successful investing. I was amazed that several current members of the Optimus club personally knew one or more of the original club founders. That’s truly what can be called continuity!
• Market timing: as a corollary to a long-term approach, an investment club long is unlikely to be a fan of a market timing approach i.e. an approach based on the belief that investors can predict future stock or market movements (up or down). A good thing, since the success rate of the followers of such an approach is typically very low.
• Self-reliance: the fundamentalist approach of investment clubs (selecting individual securities after analysis and discussion) helps develop an ability to manage your investments independently of market intermediaries. Group discussions of market developments and innovations, often with expert speakers, can also help self reliance.
• Savings: the discipline of regularly investing amounts for investment (the approach of many clubs) is a key factor to building a retirement portfolio. Savings are the single largest determinant of the ultimate size of investors’ retirement portfolio; see savings and returns .
•  Humility: the fundamentalist approach to investing (selecting securities after analysis and debate) develops another virtue, learning and appreciating how difficult it is to beat the market.
•  Cost Management: non-profit investment clubs avoid the typically-high management fees of actively managed mutual funds, a major drag on your long term returns; see Costs of investing . And the pooling of funds allows members to invest larger amounts, reducing the commission rates.
  
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