Investors club? Do we need it?

Of late in my office, we have started investors club. Investors club is a group of people who meet every fortnight and speak about a stock picks i.e. why would you invest in this company. This is really great as it helps us in knowing best stocks which will yield better returns for the long term.

However, when there were expectations setting, one of the common trends which were observed; that most attendees were clueless about investing in stocks and directly wanted to invest in the stock markets. Consequently, first session was kept on the basics of various market instruments where individuals can invest. However, just because it was investment club, members still wanted to invest directly in the markets. Some wanted tips without putting in efforts.

I can understand that there is definitely a thrill of directly investing in markets, but there has to be learning process involved.

During the session, I suggested two books: The Warren Buffet Way and One up on the Wall Street as a starting point of understanding stocks and companies. After this session, one and half months have passed and in the next session when asked who has read the book – no one replied yes. None of them has even bought the books, let alone reading them. If this is the case, then how in the hell are they going to read the annual reports which is a most-read document for investing in stocks? Ideally one has to spend 5-6 hours in a week to analyze the stock.

In a nutshell, they want to earn high returns without dedicating themselves for the grinding work. Well, one can still generate benchmark returns, but one has to accept that he can’t devote time on this and there are other experts who can do that for him. Here comes the mutual fund advantage, where the person who doesn’t want to devote much time on research. So he has to be truthful with himself and assess his priorities before diving directly in the stock markets. Yes, this will be unexciting but it frees him to do other stuff which interests him. Also, it provides him the discipline to invest regularly in all market cycles which will ultimately result in creation of wealth over the long term.

Also, one thing which was missed in expectation setting session was that how much one saves of his total income. If the person is not able to save even 10% of this total income, then it is meaningless to speak about investing in front of him. What is he going to invest if he is spending every penny? Is there even a point to explaining him about investing and wasting one’s time…

These are solely authors’ views.