Thread by @MukasaMulya

Why do Investment clubs struggle to invest and what to do about it?

Many people have wondered why savings/Investment clubs can collect millions and yet fail to invest a single coin. Where lies the problem and what can we do to overcome this?
1/

When we come together, we can achieve more in saving but not necessarily true for investing. In Psychology, we learn that the collective intelligence of a group can be lower than its individual sum. Same with risk-taking.
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This also translates into how to perceive and deal with risk. Groups generally have a lower risk profile than the individuals that make up the group. Understand your group risk profile and deal with it.
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The people that tend to organize savings/investment groups are risk takers/entrepreneurs and the joiners tend to be the risk-averse type. So, from the onset, there are conflicting personalities. The risk-takers need to create rapport to generate investment buy-in.
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There is a need draw-up investment policy guidelines and where possible automate investment decisions or hire a fund manager.
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We also tend to castigate those that make group decisions especially when they don't work out. No one wants to invest and lose members' money. So, they would rather not take the chance. We need to agree that losing money is part of the investing game.
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People save leftover money and as such our groups rarely have decent amounts to save. Making decent investments that lower the risk while increasing their returns is tough. Aim to save a good investable amount.
7/

Uganda is full of hot money. Most investment clubs don't have capital patient enough to stay invested for more than 5 yrs. In the short run, a market is a voting machine but in the long run, it’s a weighing machine i.e., it is more predictable. Aim for the long run.
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Risk Reward Ratio is a problem. While everyone can contribute the same, when it comes to investing, someone or a few bear greater responsibility, and yet when it comes to returns, can only get what everybody gets. This breeds resentment and sometimes leads to inaction.
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Some Members of the club need to be incentivized to achieve certain milestones.
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The assumption that we should contribute similar amounts doesn't also reflect the true nature of economics. 10% of the people have more than 50% of the population.
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This 10% that control significant resources find being in an investment club a social rather than an economic activity. If you are a 10% member, it may make sense to seed your group with more than your expected contribution.
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It's now a fact that if you live in a sizable city like Kampala, there is already a premium on your productive time, and many don't have time to spend hours in non-productive savings/investment club meetings.
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Without people coming to meetings, it becomes very difficult to raise the quorum and take investment decisions. However, if these are agreed on well in advance, investing might still continue.
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If you have any questions on how to help your savings group do better, I will be happy to hear from you.
END

I'm a Real Estate Investor, Financial Advisor, Entrepreneur, People’s Professor of Streetnomics and the Author of “The Great Financial Rebuild” & “Investing for the Future” Contact [phone] email: [e-mail]

Thanks for the follow🙏🏾