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My Investment Club – 2 Years Later

While the seeds were planted over 5 years ago it wasn’t until the end of January 2013 when I started an investment club with 8 other friends.  The idea was simple enough, we would each put $500 in to start, and then every month thereafter we would automatically deposit $100 a month.  Buy and sell decisions would be made by a majority.  I didn’t have a lot of faith in the club early on, but after a few months we really started to work together.  It has been 2 years since our account was finally opened.

Investment Club Results

On the 10th/11th of each month Fidelity updates the performance tab.  It provides a snapshot of how each account is doing, and while there is some lag it is much more accurate than if I tried to recreate the data.  Since the inception our investment club is up a cumulative 48.10% or an annualized 21.70%.

Investment Club 2 Year Return
The difference between the Blue and the Yellow is our investment gain. However, while those numbers seem impressive they mean nothing in a vacuum.
They have to be compared to some type of index  which is a basket of stocks that could have been purchased instead of debating on facebook.  For example, if you wanted to buy the 500 largest companies in the US you could simply buy a share of an S&P500 ETF and you would be set.

I think it is fair to compare the account to two separate indexes to see how we did for the year.  The S&P500 which is a basket of US’ 500 largest companies as well as the Russell 2000 (both indexes are defined in the link above).

  • According to Google Finance the S&P 500 has returned 38.86% over this same period
  • According to Google Finance the Russell 2000 has returned 34.62%

To beat two major indexes by this amount is pretty ridiculous!  Although I should mention that the cumulative returns of both indexes would be higher if dividends were reinvested heir cumulative returns may be a bit higher with dividends reinvested but I couldn’t find a calculator to do that for me. If we continue, we will have down years (and that is inevitable) but we just happen to start smack in the middle of one of the biggest bull markets in history.  Whether it is luck, or synergy I’ll take it!

Personally, I think a lot of our success is discipline.  You have to clear your investment through some pretty harsh critics, and then we follow Warren Buffett’s number 1 rule – DO NOT LOSE MONEY (his second rule? DON’T FORGET RULE NUMBER 1).  In 2013 we did not close out on any losers and in 2014 we closed out on $785 of losers compared to $3,600 in gains.

If I have one complaint it is the lack of participation from some in the group.  I do not mean putting a stock idea forward, but rather putting an opinion or a question forward.  I don’t think there is anything that will change this year with that complaint, but if that’s our only problem I think we are in a pretty good place!



  1. Good job! It’s important to measure your performance. One of the things our clubs have as a tool is a way to to an apples to apples comparison to see how they are doing.

    Our performance benchmark report shows how investments in their club have performed and compares that to how they would have done if they had made the same investments at the same time in just about anything that has a ticker symbol.

    By default it compares club performance to an S&P 500 Index fund, VFINX. You can see a sample of the report here:

    It’s also fun to compare club performance to an investment in Warren Buffets fund, Berkshire Hathaway (BRKB)

    Laurie Frederiksen

  2. Congrats! I’m curious over the two years have you had anyone leave the club? Did you guys set some kind of formal or informal rules in place?

    • We have not had any leave or join the group. We did set guidelines for leaving:
      – A person lets the group know he wants out
      – End of 30 days he gets whatever cash we have available out and the price of the fund at the end of those 30 days (no market timing)
      – End of 60 days he gets a check for the remaining amount

      This way the group has 60 days to figure out where the money is coming from to pay the guy off. This may possibly alleviate a forced liquidation of a position at an inopportune time.

      We didn’t come up with this at first (actually we didn’t even really worry about it). This set up came after some very intense discussions at year end 2013 meeting.


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