Monthly meetings are a hallmark of the investment club approach to building a portfolio. Meeting once a month not only assists clubs in meeting one of BetterInvesting’s core principles — that of investing regularly — it also serves to put the brakes on the use of more active investing strategies. It’s difficult to engage in anything but a long-term-focused approach to selecting stocks if a club comes together only once a month to make portfolio decisions.
Even so, there are often exceptions to this rule about meeting once a month that can serve to improve the club’s portfolio returns or enhance members’ education, or otherwise strengthen the club’s operations. Many investment clubs take a brief hiatus during certain times of the year. Clubs in the far north of the U.S., for example, may suspend operations during the winter months when travel to meetings may become less certain or safe or because members have fled south to spend time in warmer climes. Other clubs find it more difficult to meet in the summer when members are enjoying vacations or spending time at their lake or mountain cottages.
These brief breaks in the club’s meeting schedule can actually help strengthen the club in many ways. Instead of worrying about whether a quorum can be pulled together to hold an official club meeting or leaving the club’s business in the hands of a few overworked members, members come back refreshed and stimulated, ready to tackle the tasks of portfolio management and club operations.
Once they have a few years behind them and a sizable portfolio built up, other investment clubs take a slightly different approach to their meeting schedule, electing to adjourn only every other month or even once a quarter.
The members of these clubs need to have a firm grasp on the fundamentals of stock investing, and the club should already own a strong core portfolio of quality stocks. Club members still contribute the same amount of money each year — that is, twice or four times the minimum monthly amounts they’d be contributing if the club met monthly — but merely write fewer checks according to the club’s meeting schedule.
From an investing perspective, these schedules can work quite well. Each club should have a set minimum amount they’ll invest in any purchase of stock, both for a new company or for adding to an existing position in the portfolio. Typically, this amount would be high enough that commissions and fees would be less than 1 percent of the total investment and that the security would total at least 3 percent of the club’s overall portfolio value. As a club grows, this minimum investment value must grow as well. But this also means that it takes longer for the total collected from members to reach the amount of cash that meets the minimum investment amount. Meeting every other month or quarterly allows the club to collect the member contributions needed to make investments at a material level with fewer meetings at which new or re-investments can’t be considered.
Of course, in any case where a monthly meeting schedule is adjusted, the club should have an ICE plan in effect. ICE is an abbreviation for “in case of emergency,” and the club’s ICE plan should address the contingencies in force when one of the club’s holdings is deemed to be in peril and action by the club may be required.
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BetterInvesting is a national nonprofit organization that has been empowering individual investors since 1951. Founded in Detroit, the association (formerly known as National Association of Investors Corporation) was born out of the conviction that anyone can become a successful long-term investor by following commonsense investing practices. BetterInvesting has helped more than 5 million people become better, more informed investors by providing webinars, in-person events, easy-to-use online tools for analyzing stocks and mutual funds, a monthly magazine and a community of volunteers and like-minded investors. For more information about BetterInvesting, visit its website at http://www.betterinvesting.org/investing/landing/openhouse/blog/index.html or call toll free (877) 275-6242.
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