A new arrival: one of the newest investment clubs is the Frantoio in Chelsea. In a new series of occasional articles, Terry Bond, who has joined the Frantoio, will chronicle its progress

What Investment, June, 2007 by Terry Bond

Is there an organisation titled Investment Clubbers Anonymous? I wonder as I am becoming a serial joiner of investment clubs. The Frantoio club will be the sixth I have signed up to in as many years.

This new club is centred on a bijou Italian restaurant, Frantoio, at the unfashionable end of Chelsea's Kings Road. The venue has been chosen because the investment club's founder likes Mediterranean food and once had the distinction of playing golf with the owner.

The cast list

The club's members are an eclectic bunch, so because of libel laws and the fact that I don't yet know most of the other members, I will use nicknames. The founder is an old friend. He is the life and soul of any party so we'll call him "Joker John". Another long-time colleague is "Accountant Andy". And the other member I know is another Andrew--he's tall and thin so he can be "Angular Andy". The remaining founders are "Adrian the Writ" (solicitor), "Darren the Bank" (manager), "Money Mike" (another accountant), "Commerce Nick" (commercial mortgage broker), "Insurance Tony" (financial adviser), "Solution Stuart" (mortgage packager) and me.

It occurs to me that the club has a bias toward finance, which may or may not be a good thing. The problem with money men is that they tend to think they know it all, when the fact is they are often out of touch with the real world. We shall see.

Joker John is elected chairman--The club is his idea and he has read the How to Run a Successful Investment Club manual. Accountant Andy is the treasurer and Insurance Tony gets the job of secretary because nobody else wants it.

Getting started

Now the fun starts. Suggestions for the monthly sub range from 20 [pounds sterling] to 100 [pounds sterling]. Eventually we settle for 60 [pounds sterling] from each member. Then somebody comes up with the idea of a one-off 100 [pounds sterling] initial payment so we can make an immediate investment. Surprisingly, the proposal goes through without a murmur of dissent.

Darren the Bank agrees to sort out a Frantoio Investment Club bank account, we settle on a low-priced execution-only stockbroker to do the dealing for us, cheques are made out, bankers order forms circulated and over coffee--these are lunchtime meetings--we discuss our first investment.

I can imagine experienced investors tutting and chuntering about the fact that we have not discussed overall policy, investment criteria, the importance of balancing the portfolio and so on. They are right of course, but having acted as midwife at the birth of literally hundreds of clubs, I know that in practice it doesn't happen that way. The members have joined to invest: their enthusiasm should be nurtured. Investing techniques will come later and with experience.

The first investment

The decision: Goals Soccer Centres. The reasons: low price-earnings growth; high profit margins; good return on capital employed. Oh, and Joker John once had a trial for Spurs.

It would be good to report that next day we were the proud owners of GSC, but real life isn't like that. Opening the bank account and the share dealing account involved a myriad of forms and signatures. It took a fortnight before things were finally sorted and, of course, the share price rose inexorably during that time. Nevertheless, we stuck to our choice--we are in this for the long term!

As a director of ProShare (UK) Ltd in the 1990s, Terry Bond was primarily responsible for the establishment of the investment club movement in Britain. There are now over 12,500 active clubs in the country and well over 200, 000 around the world, with a total membership of more than two million.

For more information on how to start and run a successful club, go to www.proshareclubs.co.uk