Why you should join a chama

By Sophie Oyugi

Chamas bring people with common interests together. Some are formed for the sake of bonding and social growth while a majority are investment oriented.

A serious investment chama with structure and goals can offer a lot of benefits to its members. Most chamas are registered and are thus a legal partnership or a limited liability company consisting of a certain number of members.

Once your group is legally established, ensure it has a standardised accounting record.

A typical chama requires an equal monthly contribution from each member. In some groups, members don’t contribute the same amount and they have a clear way of determining each member’s shares.

To facilitate chama decisions and member education, a group should schedule regular meetings fortnightly, or at least once a month. Regular meetings are fun and insightful, as members share experiences that boost the group economically and socially.

In some chamas, members have the responsibility of researching potential investment ideas and staying up-to-date on the performance and outlook of their group going forward.

Chama members should actively participate in their group’s activities. There are many steps chamas can take to boost members’ opportunities.

Think long-term

Don’t buy stocks through an investment club if your time horizon is a year or less. A chama, especially one that intends to invest, should always think long term.

Most chamas meet only once a month, making it difficult to make investment decisions for a short term. If you want to join an investment group, look at it as something of a long-term commitment of about three to five years. Ensure all the group members find that level of time commitment acceptable.

Most chamas of this nature have strict penalties to deal with members who withdraw at its inception.

Uniqueness

It is important for every chama to have a clearly defined investment style. Every member should be aware of the club’s investing style and be willing to follow its guidelines. It can be very damaging to an investment group’s atmosphere when members want to invest group funds in varying fields.

If you have just started your group, ensure every member understands and supports the chama’s approach and that the chama’s style meets each member’s needs.

While investment groups should strive to make as much money as possible, education is one of the main reasons for joining a chama. When chamas invite finance and investment experts to speak to their members, profits naturally follow.

Educational value

The group should also ensure that all members receive an equal level of educational value. It is actually a good idea to assess a chama’s level of member expertise before you decide to join. This will ensure that there is a reasonable match with your own skill level. All members of a chama should participate in its activities equally although some members will naturally carry more of a leadership role than others.

Chamas are an excellent way to ease your way into investing without getting ripped off by unscrupulous brokers. Whether you start your own group or join an existing one, being a member of a chama is enlightening and an excellent learning experience.

If properly founded and maintained, chamas can yield their members excess returns on their investment funds year after year, while providing them with an invaluable educational experience that will last a lifetime.