The company you keep - office investment clubs - Brief Article

Black Enterprise, Dec, 1999 by Olayinka Fadahunsi

There are pitfalls and rewards in establishing an investment club with co-workers

If you're thinking about starting an investment club at work, your future partners could be sitting in the cubicle next door.

Investment clubs centered around the workplace have an obvious edge, says Gail Perry-Mason, one that may prove superior in helping them clear the hurdles common to clubs of all stripes. "First of all, you spend more time with co-workers than you often do with your family. Time together is limited in other settings but [there is] no limit in a workplace-based club," says Perry-Mason, vice president of investments at First of Michigan in Detroit, a division of Fahnestock Inc. "And you can make payday the due date for contributions."

Financial counselors like Perry-Mason say that African Americans who are cautious about trusting their hard-earned dollars to a stranger would benefit greatly from starting an investment club with colleagues on the job. By pooling $25 to $50 or more a month, and getting together with some associates, the workplace can be a perfect vehicle for blacks to build wealth, says Perry-Mason.

"Somebody can research stock picks during their lunch hour and make the buying fun [for the group]." A larger investment means a higher return, she says. Therefore members are able to spread the risk of loss quite thin, making sure that market dips or corrections are not devastating to individual investors.

Kenneth Janke, president and CEO of the National Association of Investors Corp. in Madison Heights, Michigan, is also a supporter, although with reservations, of the work-based club. Even though the burgeoning interest in forming African American investment clubs makes it easy to corral some friends into starting one, Janke has some cautionary words about rushing to establish a club on the job. One particular problem he has noted with workplace-centered associations is the membership tends to be built around one individual--a weak structure, he maintains.

"The first thing that people should consider is that the typical club has 15 to 16 members, and your average person can't always find [that many] co-workers. Talk to one or two acquaintances, and ask them to invite some co-workers they know well." This way a wider net is cast and you have a better chance of bringing in people with diverse interests and areas of expertise. "My investment club, for instance, has a doctor who looks at our medical portfolio and tells the club about upcoming medical advances, and an engineer who does the same [in his field]," says Janke.

6 Keys to Establishing a Successful Work-Based Investment Club

1 A few hundred of my best friends? Spread the word among one or two co-workers and ask them to bring others to the initial meeting so that the club doesn't have one central figure or personality.

2 Get it in writing. Gall Perry-Mason says that all clubs should request a starter kit from the National Association of Investors Corp. (www.better-investing.org; 877-275-6242). Using sample contracts, the charter members should draw up a set of bylaws for the club.

3 Partnership or corporation? This decision has to be made at the club's inception. The benefits of incorporation are few, says Ken Janke, while the major drawback of a partnership is that all the members of the club are liable in any legal proceedings pertaining to the investment club against any one of the partners.

4 Members must commit. The contract should specify a minimum length of commitment from all members. Perry-Mason recommends a minimum of three to five years.

5 Will the real treasurer please stand up? The treasurer holds the most difficult position in the club, and should have at least two assistants, says Perry-Mason. The assistants are there to offer support when necessary; however, they should not be considered full-time treasurers themselves.

6 Make dues affordable. Set the biweekly or monthly contributions at a comfortable amount, so that members won't have any trouble making a payment even if things are tight during that period. Perry-Mason suggests amounts in increments of $25.