For those who wish to invest in the Stock market and are afraid of losing their money, a new phenomenon is appearing: investment clubs, in which would-be investors band together with up to one hundred and fifty others, spreading the risk and deepening their knowledge…and making a fortune. Here’s how they do it.
In yet another telling statistic, proof is delivered yet again that Brazil is an awakening giant. Who would have said twenty years ago at the time of stagflation that the new buzzword in Brazil would be Clubes de Investimento? Not health clubs, not soccer clubs, not sports clubs, but Investment Clubs.
How do they work?
The idea is that people feel safer in investing in the Stock Market if they join together with like-minded investors, numbering between three and 150 others. Brazilian specialists in personal finances state* that people feel more at ease investing if they are not alone. These clubs have mushroomed in Brazil in recent years, rising from 379 clubs in the year 2000 to 3,119 in 2010. Such is the increase in activity that the Brazilian regulatory authority CVM is having to revise the regulations covering the sector.
The specialists claim that one of the main attractions of investing in a group is the pool of knowledge, which in turn facilitates the diversity of the investment and the spread of the risk. Another benefit is the fact that the costs are diluted among the members of the club.
A number of investors learn the ropes by making their first investments through clubs and once they know what they are doing, branch out alone.
Fernando Friedheim, director of UM Investimentos, which controls the assets of 200 investment clubs, explained the mechanics of the clubs in an interview to Agencia Estado. The members each open an account with the stockbroker and then contact the intermediary, who oversees the regulation of the club.
The members then decide on how much their initial investment will be (in Brazil the minimum is 5 thousand Reais, or 2,850 USD) and in which portfolios and the brokers or intermediaries provide advice when the investors ask for it.
* Source: Agencia Estado