A diverse portfolio is said to be the key to riding out difficult market climates. What Investment meets an investment club that adopted a diverse approach  and has been reaping the rewards over the past 12 months

Martin Walker has been chairman of the LC Investment Club since 2007. Over the past two years his role has been to ensure the club’s monthly meetings, which take place in their local pub in Long Clawson, Leicestershire, remain focused and productive.

‘My job is to make sure the meetings flow and don’t drag on too much,’ says Walker. ‘We have ten members at present, all of whom live in Long Clawson, hence the LC in the name of the club.’

A light-hearted approach
While Walker takes the role of chairman seriously, he is also keen to point out that the club serves as a social hub in the village, providing members with an opportunity to meet regularly and have fun. ‘It is important members don’t take it too seriously,’ he says.

In addition to adopting a light-hearted approach to investing, members have agreed to a number of rules and strategies designed to help the club make the fairest and most appropriate investment decisions possible.
For example, because not all members can attend every meeting to vote on what shares should be bought or sold, a minimum of four members must agree before any decision is made.

Furthermore, in order to ensure their portfolio is kept to a manageable size, no more than 20 companies are invested in at any one time. Crucially, the club also invests in companies from a wide range of sectors, including software and computer services, property, pharmaceuticals and biotechnology, general retailers, banks and mining companies.
‘We made a decision to make sure our portfolio reflects the diversity of our membership. We have members who are in the IT industry, property, pharmaceutical companies and retail businesses, and it’s important that we use their knowledge to benefit the club,’ Walker explains.

‘If someone has experience of a specific sector, then we encourage them to take responsibility for that sector. Having an affinity with a certain sector makes researching investment ideas easier – and more enjoyable too.’

Helping minimise risk
Ensuring the club has a diverse portfolio of investments plays an important part in helping to minimise risk. Should one sector fail to perform as expected, there’s hopefully another that exceeds expectations. It’s a strategy that has proved particularly effective over the past 12 months.

Walker enthuses, ‘When the banking crisis hit and the price of banks’ shares went into freefall, we decided to hold onto our shares in RBS and Lloyds until trading conditions were more favourable. Our only comfort was the fact that banking made up a relatively small part of our portfolio.’

A rewarding strategy
Since the banking crisis, the LC investment Club has reaped the rewards of having a diverse portfolio, as Walker explains, ‘In the property sector, which has experienced a bit of an upturn lately, Minerva and Land Securities have been good for us. BP and Tesco have also proved to be a good investment, while in the software and computer services sector Apple Inc has done really well.’

By making a conscious decision to invest in a wide range of different sectors and utilise the first-hand knowledge and experience of its members, the club has managed to help reduce risk while playing on individual members’ particular strengths. It’s a strategy that has served the LC Investment Club well.