Page 58 - merged.pdf

•38 The 100 Greatest Business Ideas of All Time

money is to be invested at low, medium and high risk, and what they mean by those
risks. Our club is a savings scheme so more than half of the money is invested in
FTSE 100 companies.

If some members are less interested in the nitty gritty of investment decisions,
they may leave that to others or even to a sub-committee; but the people with the
delegated authority to make such decisions will be bound to operate according to
the strategy or to go back to the whole membership if they wish to suggest changes.

The members, or the sub-committee, then choose shares in the way that the
members have agreed. Some strategies are no cleverer than sticking a pin in the
Financial Times, or using members’ knowledge of their own industries as a guide.
Here is a summary of a more logical way of team share choice.

• Using their knowledge and observation they choose a sector for investment.
• Using their strategy and current spread of the portfolio they choose the correct

level of risk.
• Using the price/earnings ratio and yield they identify some four or more shares

which are in the category defined in the first two steps. They get the annual
reports of these companies. They probably action one or two members to do
the evaluation work.
• Using published information they discuss the company strategy.
• From the same information they calculate the key business ratios, discuss
whether they support the business strategy and possibly compare them with
industry averages.
• They finally evaluate whether they believe the managers of the business can
carry out the strategy successfully and make a decision.

In five years, 20 of us have built up a fund of £130,000, and, touch wood, we
regularly beat the average unit trust over one, three and five years.

If we take the periods to June 6 1999, just as an example, we beat the average
unit trust as follows.