How Facebook investment club has amassed Shs749m

Individuals are not only seeking high returns from assets such as company shares but also strategically balancing their portfolios by investing in more stable options such as treasury bills and bonds.

By diversifying, they aim to hedge against market volatility, allowing them to pursue aggressive growth opportunities while maintaining a safety net of reliable investments.

This calculated strategy blends risk and stability, providing investors with the confidence to navigate an unpredictable financial market.

In 2019, amidst the uncertainties of the Covid-19 pandemic and with limited income to spare, a small group of Facebook friends took a step by forming the ‘Stress Free Investment Club.’
Linda Ochieng, the administrative assistant at the club, shares that the entire initiative started online with only50 people.

Initially, members were required to save Shs2,000 per day for 30 days, amounting to Shs60,000 each month.
This amount was increased a year ago to Shs3,000 per day, raising the monthly contribution to Shs90,000.
As a result, a dedicated member who has consistently saved since 2019 should have accumulated slightly over Shs4.5 million by now.

Value
By June 2024, their aggregated account held Shs749 million among the 200 members.
The team has not invested the accumulated funds just yet. Instead, they intend to first build up a substantial cash reserve, aiming for a figure that exceeds Shs1 billion before making any investments, which it plans to do within the next two years.
Its vision is to use these funds to build homes, as many of its members are unable to afford constructing houses on their own.

The club plans to invest in shares of companies on the stock market and government bonds to maximise returns while mitigating risks from market volatility. 
This approach mirrors the business model used by unit trusts, which balance investments to maximise their returns and assets, while hedging themselves against volatilities that come from financial markets.

Trust
Ochieng says, her team has managed to garner people’s trust as club administrators, because of how it manages the club’s cash flows.
“Our account is so strict that no two people can connive, and go and withdraw money from the account. With technology even if somebody tried, we would get alerts on our phones like most accounts and quickly block transactions,” she says.

“We don't want to spoil our accountability. We want to leave a legacy that these people who didn't know each other came together. Since they were unified by saving as a group, it worked. If you are accountable, deliberate in your motives and follow the rules and regulations,” she adds.

Challenges
But not everything has been smooth sailing for the Stress Free Investment Club.
According to Ms Ochieng, the club has faced skepticism from potential members who question the safety of their contributions. Many are hesitant, fearing that even small amounts of money might not be secure.

Despite these concerns, Ochieng reassures that there has been no mismanagement of funds to date.
Inconsistent saving has also posed a challenge. The tough economic climate has affected some members, leading to job losses and financial instability. As a result, some members have requested leniency in their payment schedules, a request the club has accommodated.

Additionally, the club has struggled with meeting attendance.
Quarterly Zoom meetings, designed to accommodate members globally, often see only a small fraction of the over 200 members participating—sometimes as few as 20 people. Scheduling around various time zones and busy schedules has also proven difficult.

Moreover, some members prefer to keep their savings discreet, which sometimes leads to them missing out on important policy updates discussed during meetings they did not attend.

Objective
Ronald Sebunya, the club’s executive director, emphasizes that their primary goal has always been to pool funds to help members achieve a shared objective: owning a condominium within five years.
Driven by a collective aspiration for financial growth, the club enables individuals to combine their resources to meet their investment goals. The club operates on an egalitarian principle, with all members contributing equally to the fund.
New members can start by making payments in installments and are given a period—typically one to two years—to catch up. However, only members who are current with their savings will be considered for ownership of any future investments.

Constructing homes
Mr Sebunya says that currently, the club is partnering with real estate firms so that it smoothens the club’s growth to realise its member’s vision of providing a home for every member. It wants to build more than 100 units.
He understands that housing costs are prohibitively high, not just in Uganda but globally, and the expense of building a home is substantial.

Recognising that individual ownership can be challenging, the club has leveraged economies of scale and collective savings to build a significant fund for investment.
By pooling resources, the club aims at creating a large financial portfolio that can be used as a lump sum for investments.

Mr Sebunya says these benefits are not only pegged to the existing club members but also new entrants.
“Our club is mostly dominated by females, almost 80 percent. This shows you the emphasis and the key agenda that the lady can put forth when it comes to saving and raising funds,” he says.

“Those are the mothers of the nation and we feel that if we empower them through this club, we are empowering their families, their children to be able to pick up the mantle of saving and planning for the future,” he adds.
Unlike how unit trusts work, this club lends to its members at low interest rates of 1.6 percent which is supposed to be paid by the member for any amount that they borrow and they are supposed to pay back within three months.

“This is to make sure that we address the needs of the members or address the challenges that our members have. They have challenges whereby they don't have school fees for their children, they are sick and cannot afford medical bills. Some have family concerns that need money. Instead of the member exiting the group, we create and avenue where they can pick from the pool of funds and address those challenges but also continue to save,” says Mr Sebunya.

“We have built that habit of saving where members can save for five years, where no one is getting any payment that is given to them in those years. We have maintained a steady number of more than 200 members who have saved for all this period,” he adds.
In today's world, where disposable incomes are shrinking and businesses are facing unprecedented challenges, the role of investment clubs has never been more crucial.

Financial stability
These clubs offer a beacon of stability and collective strength in an era marked by financial uncertainty and economic turbulence.
By pooling resources, members can mitigate individual risks and benefit from the collective power of their combined savings.
This collaborative approach allows them to pursue significant investment goals, such as home ownership, which might be unattainable alone.