Growing up, I had the mixed opportunity of accompanying my mom to the marketplace on many occasions. I call it a mixed opportunity because sometimes it was a great way to get out of the house, other times, not so much.
It started out as an interesting way to feed my curiosity until I got older and grew weary of the hustle and buzz of the market.
One of the vivid images I remember, as a child, was seeing a woman stop at each market stall to request for the market woman’s monetary ‘contribution’. These women always walked around with squeezed jotters or sheets of paper which they either handed to the market woman to sign-off as proof of payment or took the liberty to tick off themselves on behalf of the market woman.
It was always interesting to see the market women reach into the seam of their wrappers to bring out wrapped notes of Naira and hand these Naira notes over to the collector. It took a while but I eventually learned that these women were collectors for the traditional savings contribution scheme known as ‘Ajo or Osusu’ (in some cultures).
Women in the traditional marketplace have always taken advantage of the power of many with the ‘Ajo’ scheme. Most of these women lack basic education and thus do not operate bank accounts. As a result, they couldn’t access credit because they do not operate bank accounts. The ‘Ajo’ was a way to contribute to a purse and get access to ‘credit’ for major expenses such as school fees, pay for inventory, or expenses during the festive period.
According to EfinA, a financial sector development organization that promotes financial inclusion in Nigeria, 34.9m adults, representing 39.7% of the adult population remain unbanked (Access to financial services in Nigeria 2012 survey). Billions of Naira circulate through the informal sector as over 23 million Nigerians still save at home or in community savings contribution schemes
What’s even more interesting is the fact that the ‘Ajo’ scheme is also quite popular in business organizations. Young working professionals contribute to a scheme and take turns to collect the total amount in the purse during the savings cycle. The only difference between theirs and the traditional schemes is the cash contributed goes through the financial system
As a young graduate, I got the request to join some ‘Ajo’ schemes and I took advantage of them as well.
However, what always happened was after receiving my portion of the Ajo, all I did was spend it. This happened all the time. I tried to invest in some asset options such as the stock market, mutual funds, a couple of times, but I never took investing seriously.
I’d worked a couple of years and decided to enroll in an MBA program. When I got accepted and had to make plans to resign and live on no direct income for 2 years, it hit me like a ton of bricks that I had no passive income whatsoever. I had worked for 4 years and not deliberately set any income aside to invest and earn returns on my investment. This was a eureka moment for me and I decided my wealth habits had to change once I got my first job after my MBA.
Immediately we completed our MBA program, my friends and I decided to start an investment club. We thought it was a novel idea until we discovered investment clubs were quite mainstream as well. There are investment clubs all over the world and they were all formed to take advantage of and harness the power of many.
What is an investment club?
An investment club is formed when a group of people decides to pool limited individual funds together and, invest the pooled funds in high potential asset options and impact society.
An investment club adds an additional step to the traditional ‘Ajo’ scheme. In an investment club, members contribute to the club’s purse on a regular basis, however, they do not expect to receive payment in cycles like the regular scheme. The club invests the funds contributed in selected asset options to build the wealth of its members.
A quick survey asking young working professionals if they are interested in investing showed most of them are interested, however, they think their individual funds are limited and can’t invest in any significant opportunity.
An investment club offers a win/win solution. If you think your funds are not limited, you can start an investment club with 5 or more friends and together you can take advantage of investing with your pooled funds.
On an individual basis, I couldn’t have built up the stock portfolio we currently have as a club or invested in SME’s we have invested in, across different industries. However, as an investment club, we could do it together. We have invested in bigger opportunities that required higher funds and earned health returns as well
Some additional benefits of an investment club include;
Learning how to make better investment decisions – When we started our investment club, we were honestly clueless about how to make good investment decisions. Yes, we were all MBA graduates but they really don’t teach you how to invest in business school. We took up the challenge to learn how to make investment decisions as a team. We sought out experts to meet with us and offer guidance. And yes, we made losses and bad decisions but we took them as lessons. We wouldn’t trade that experience for anything today.
Accountability – The members of your investment club keep you accountable to your wealth goals. Life happens. Unexpected situations crop up which we don’t plan for and sometimes, they give us genuine reasons to keep our wealth plans on the back bench. But being a member of an investment club makes it difficult to quit. The members of your investment club will offer support and encourage you to stay true to your commitment to building wealth with the club.
This is why it is important to pick the members of your investment club wisely. Start an investment club with people with similar goals and are committed to long-term goals like you are. An investment club is not a quick-fix way to build wealth. Some of the investment clubs in the USA have been in existence for over 50 years and the members have stayed committed.
What would you rather do? Continue to wait till you can build your individual funds or take advantage of the power of many by starting an investment club with friends. The current economic situation in Nigeria offers great investment opportunities. It’s time for us as citizens to pool resources and take advantage of the opportunities within our borders.
Let’s not wait any longer. Let’s take advantage of the power of many and keep our resources here. That’s the opportunity an investment club offers
Tomie Balogun is the leading expert on how to start, manage and grow investment clubs. She’s on a mission to help young working professionals take advantage of the power of many and build wealth in the process. She shares actionable advice on how to invest on her website www.tomiebalogun.com. You can download her free e-book on the five steps to a successful investment club here