C-TRADE recently introduced investment clubs at the Inaugural Investor Day Conference held on the 15th of May at the Harare International Conference Centre. The concept of investment clubs is not new and has its roots dating back to a thousand years ago. The world’s first investment club is said to have been established in Texas in 1898 back in the days of the Wild West when few investments could be considered safe. Investment clubs were seen as an ideal way of spreading the risk – away from just cattle. Today it is a concept that is widespread even on the African region.
An investment club is a group of individuals who meet for the purpose of pooling money and investing. The conventional way of managing investment clubs is that members typically meet on a periodic basis to make investment decisions. The challenges of the traditional investment clubs include lack of trust amongst group members, lack of transparency and honesty, poor record keeping systems, inadequate administration skills, limited access to capital markets among others.
The C-TRADE investment clubs closes these gaps as it is a service provided on the trading platform that pools funds of participating members online with the primary goal of enabling participants to buy shares in bulk. Participants of investment clubs have the option of depositing contributed funds into one account on the C-TRADE platform and using that same account to buy shares through the use of an administrator. The main aim of the Investment Clubs initiative is to bring traditional cooperative clubs to the stock market thereby enhancing financial inclusion.
C-TRADE further aims to build a nest of long term sound investments options. There is the potential that the synergy of investment clubs can translate into higher returns than one could have achieved on their own. Through trading of securities in groups, C-TRADE aims to help individuals grow their wealth and increase income at the click of a button as all this is done electronically. Investment clubs generally have more buying power as opposed to the case with individual investments thus more shares can be purchased at a given time which in turn increases the chance of getting quicker matches and hence, increasing investor satisfaction and in turn confidence in the whole capital market ecosystem.
The Investment Club works in such a manner that the account creation and administration function consist of a member administration module which caters for account creation, adding participants, removing participants and a club members’ register. The administration module also facilitates the capturing of KYC documents and each member to contribute their share of funds through giving the system direct access to their personal accounts funds. When the administrator places a BUY order instruction to the Exchange, funds will be deducted from each group member’s C-TRADE account. In case of insufficient funds in a member’s account, the order in question is declined.
When a match is made, the system calculates how much of a stake each person has in the club and presents it in the club menu under ‘Investment clubs shareholding details’. Apportionment of funds to club members according to what they have contributed through the use of basic ratios or percentage calculations.
Likewise, in the event that a group member decides to leave the group; assuming that the group has holdings in various assets, the system will calculate how much stake holding one has and as soon as they leave, the relevant assets are deducted from the group’s portfolio. The investment clubs supports various payment gateways that include EcoCash and ZIMSWITCH.