Cash Club: How I started my investment club

Let me share a story of how I started my investment club.

A year ago I watched a video by Nicolette Mashile on Facebook. In this video, she proposed a stokvel of 20 people contributing R5,000 each a month, making it a R1.2m a year stokvel.

This can buy a nice investment property every year that will accumulate rental income. All these properties would be bought in cash. I looked at the math and it made sense.

By pure coincidence, I came across the Listed property vs. buy-to-let Power Hour video on Just One Lap. I ran Nicolette’s stokvel numbers and either way, you would be well off at the end of the 20 years – especially considering the absence of bond repayments that would reduce the cost of the investment significantly over the period.

However, because I am a low-income earner, I couldn’t even think of joining a stokvel that requires R5,000 from me every month. But the idea had struck me so hard that I wanted to start my own club that will maybe buy cheaper properties, so the contributions will be less. Because I watched the Power Hour video, I thought of an investment club that will buy into listed property stocks or ETFs. But then I figured – why not a diversified portfolio of ETFs? As the investment club members grow in their respective fields and earn more money, we can then consider property.

So I went to a Moneyweb event at the Sandton Convention Centre, spoke to a few financial service providers and brokers and asked if we can do that. All of them said they do offer JSE market exposure for investment clubs.

Next, I contacted friends who had jobs and who I thought would be interested in joining this venture. At first, I had about 15 interested people of which only about 12 showed up to my first meeting. The number went down to seven then five (I was close to just giving up). But then we started to save money in the bank, but the admin fee was more than the monthly interest we were getting. Eventually, the interest became more than the admin fee. We then lost two more members in the process. We eventually managed to open an Easy Equities account and started to invest in ETFs.

At the time of writing, our portfolio is 60% cash and 40 % ETFs. However, those numbers are changing as we now deposit directly into our Easy Equities account. Hopefully, we will eventually have a 10% cash and 90% ETFs ratio. And maybe then we can revisit that buy-to-let property option that inspired the investment club in the first place. But for now, we will buy ETFs.

In December 2018 we will celebrate our first year of investing. The portfolio has done well, we are 12% in the green and I don’t see that number going below 10% between now (October 2018) and December. We hope to grow the number of members from three to five or ten, but we’re also happy to just keep it to three. Our ambition is to turn the club into an investment company someday in the future. Watch this space.

Njabulo Nsibande is a Just One Lap user-turned-contributor and a founding member of an investment club. His “Cash Club” blog details his experiences balancing the financial obligations of a young parent with his investment aspirations.

Follow Njabulo’s journey here every month. You can also follow his trading journey by listening to his Village Trader podcast.

Find him on Twitter: @njabulo_goje.