The Duckers and Divers Investment Club is one of the more mature members of the investment club fraternity. Based in the village of Horton, near Taunton, the club has been running for ten years and was originally made up of 20 members.

However, when Chris West became chairman four years ago, he discovered that the club hardly ever had meetings with a full member turnout. He explains, ‘I found that members who were more involved in the investment decisions were unhappy with “carrying” the other members and making money for them. Quite a few members didn’t
turn up to meetings, so when I took over as chairman I closed the club temporarily so that we could restructure.’

The benefits of restructuring
In the same way that restructuring a company can result in a leaner, fitter, more profitable enterprise, so Duckers and Divers is now a strong, all-male team of 12. West reports, ‘We find that having 12 members means everyone gets involved and is responsible for the investment decisions. It is better to have a smaller number of members that are actually interested. This means members have much more input.’

The club meets once a month in a private room at their local pub, but West ensures that conversation remains investment focused. ‘It is always a serious meeting because it needs to be. However, most of the members stay afterwards for a social drink, and the conversation often reverts back to investment,’ he says.

It isn’t all work and no play, however. West stresses, ‘We meet three to four times a year socially. Recently, we spent an evening enjoying fine food at an Indian restaurant, and our wives are also invited to come along.’

A diversified strategy
Commenting on the club’s investment strategy, Chris West affirms that ‘Duckers and divers sums it all up as we aim to duck the pitfalls of the stock market.’ The breadth of investment knowledge among the team varies. He points out, ‘Our treasurer is a retired accountant and is very alert to market changes.’

West, on the other hand, became interested in stock market investing during the dot-com boom of the late 1990s. ‘I bought 1p shares and did reasonably well, selling the shares for around 30 pence, which sparked off my interest in the stock market. It was during this time that I read in the press about the benefits of investing through a club.’ He then sought out the Duckers and Divers.

The club tries to maintain a diverse portfolio, both in terms of indices and market sectors. Its members recently felt that it was time to introduce some more defensive stocks, so they started looking at financials again, particularly bank shares.

West says, ‘Our current portfolio is made up of pharmaceutical, banking, travel and engineering shares. We like to spread our investment and not concentrate on one particular sector. We have invested in Anglo American, which is the most expensive share we have ever bought. We came out of Northern Rock a few years ago, Rolls-Royce has done well for us, as has Barclays. However, the current state of the banking sector has got me a bit nervous.’

The investment club makes all its trading decisions at its monthly meetings. Members pitch companies they believe to have good prospects and the portfolio is reviewed. But the focus is on shares that are going to appreciate over time.

West continues, ‘We make our decisions on a month-by-month basis rather than planning further ahead. We take forecasts from the newspapers – they are usually fairly reliable – and we often go on what they say.’

Cut your losses

West believes that a key element of a successful investment strategy is that you must be committed to holding an investment for a sensible period, while being fully prepared to take a loss when necessary. He insists that ‘You only invest if you can afford to lose your money.’

However, it is possible to be too fearless in the face of a loss-making investment, and West has reintroduced a stop-loss limit to prevent the club from losing large amounts of money.

The club is partial to the odd bit of speculation. West explains, ‘We wanted to have fun in our meetings, so while our portfolio has a strong backbone of dependable shares, we like to balance this with some speculative investments.’

Aiming higher
Investing in AIM shares certainly involves a higher level of risk, and many investment clubs prefer to stick to the relative security of the Main Market. However, some good ‘inside knowledge’ helped persuade the Duckers and Divers to live up to their name and dive right in.

One member of the club had a good knowledge of local manufacturing firm Gooch & Housego. This company is listed on the FTSE AIM All Share Index and is an international group that designs, manufactures and supplies acousto-optic devices, precision optical components, bespoke crystals and instruments for measuring optical radiation.

The investment was a risk but, according to West, was one worth taking. ‘From the information of one of our members, we opted to invest in Gooch & Housego, and it has been a very good investment for us so far.’

He adds, ‘The club is becoming much more adventurous in its investment decisions. However, I am not sure whether investing heavily in markets such as AIM is for us, as the market is more volatile and there are never any guarantees.’

Not always positive
Taking a chance doesn’t always pay off, as the Duckers and Divers have found out. ‘We have had some disasters too. We thought we should get into the online gaming markets so bought into Sportingbet. This performed very badly,’ West laments. ‘We were close to reinvesting in Northern Rock and many members were for it at the time of the collapse. The decision was made to monitor it, and in the end we didn’t go in.’

Any club’s success rides heavily on the members’ commitment to maintaining  its investment strategy, particularly when markets are as volatile as they are at the moment. West believes that having committed members that are all prepared to have an input into the management of the portfolio is the key to successful investing. But, as  he points out, it is also important to have a strategy: ‘If the market is turbulent, we sit tight.’