Group investing provides an opportunity for sharing the risks, joys and pains of investing. Yet, investing within a group arrangement is probably one of the most difficult and complex undertakings.
This we will now explore in the bigger group. There are difficulties with big groups of investors. Similar issues as with an investing couple apply and these issues tend to get more complex as the size of the group expands.
Generally, everyone thinking of joining a particular investment group should ask themselves the following questions:
How do I help maintain the optimism of the group in the face of reversals or setbacks? How do I help us all to move past regrets and bad feelings, and promote unity and continuing action? How do I help each member to be tolerant and avoid the propensity to cast blame?
How do I encourage myself and all other members to get committed and stay committed for the long-term? Each group member needs to understand group dynamics, the background and expectations of individual members, and the fundamental investment process.
Everybody is investing with the hope of acceptable returns; but as long as you invest, you also stand a chance of losing part or all your funds (or purchasing power).
This understanding is so critical that it is recommended that any investment group develop an explicit memorandum of understanding, MOU.
The elements of the MOU would be reached through extensive discussion and mostly through consensus. Indeed, the MOU should even spell out the decisions that do not require consensus, and in such cases, how would such a decision be reached.
When members feel that they are developing, they are more likely to stay with the group. This is an important issue since retaining group membership is more critical than in the case of a couple who more likely to stay together for life.
The meat of the matter is that no matter how small the group, even with a couple, group investing involves sharing responsibility.
It is proposed that any reasonably effective investment group should best not exceed ten members in number unless there is professional management in place.
As an individual investor, you may be able to forgive yourself or appease your conscience when you “make a mistake”. However when you are in a group and take any form of leadership, you are accountable to yourself and the group. You may feel a continuing sense of blame, even if your partners do not declare it. This effect often constrains really high risk taking in group settings as against the daring of an individual investor.
Simply said, group investing is as diverse as the investment opportunities themselves. You need to get a good handle on it before committing your funds.
