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•36 The 100 Greatest Business Ideas of All Time

Idea 25 – Run a private unit trust – an investment club

So, if being a unit trust manager is such a clever way of making money, how can
private individuals get the same or a similar opportunity?

The one advantage of unit trusts over doing your own investing as an individual
is that a unit trust gives you instant access to the widely spread portfolio that the
unit trust manager has established. If your resources are limited this can be very
useful, as it avoids the overexposure to a small number of shares in the early years of
a portfolio.

In passing it is worth noting the number of people who hold shares only in their
own company. This is the opposite of good portfolio management, which recom-
mends that you hold a spread of at least 15 shares, so that if one bit goes wrong it may
be balanced by another bit doing well. Not only that, but if you only have shares in
your own company, if the share price goes south it could presage your job going west.

Investment clubs offer a neat way of gaining the benefit of a portfolio without
losing control of the investment strategy, or paying the fees of the professionals.

I have to declare an interest here. I have been the treasurer of an investment
club for its lifetime of five years. It is a steady, some would say boring, club with
simple objectives. It is a long-term savings scheme for its members and the bench-
mark it attempts to beat is the performance of the average unit trust as reported on
Saturdays in the Financial Times.

The beauty of investment clubs is that they are essentially informal. They have
almost no expenses, since none of the people involved in running the club are paid.
But this informality must be balanced by a well drawn-up constitution and rules.
You may obtain these easily from such organisations as Proshare in the UK or the
National Association of Investors Corporation in the USA.

What happens is this. A group of up to 20 people, neighbours, friends, col-
leagues or members of the same golf club, for example, agree to form an investment
club. Some clubs have as few as three or four members. One of the members gets
hold of a sample constitution and rules, understands them and writes the first de-
scription of the club for other prospective members to read.