I must confess that I am not a huge fan of investment clubs and trading groups. I don't mean to say that these organizations are without value, I only mean to say that in my experience they are not particularly successful. Just as a husband and wife frequently cannot get along as bridge partners, I find that investment clubs spend more time arguing about what trade to enter than they do paying attention to how they are going to exit. As you undoubtedly know by now if you have been a regular reader, I am a great believer in predetermining one's exit. Both investment clubs and trading groups seem to do just the opposite and focus on what they are going to buy rather than when they are going to buy it and how they are going to get out in the event it goes against them.
I am not aware of very many investment clubs that have been successful. I am familiar with several that have broken even or suffered only minor losses, but the complaint I most frequently hear is that whoever is managing the trades is not following the guidelines set out by the club. Again, each trader has individual goals, risk tolerances, assets, and preferred trading methodologies. When these factors are placed in an investment club, compromise is necessary, and I do not believe that compromise is an effective way to place trades.
Trading groups where people get together to discuss strategies and listen to speakers do have some value, but the downside that I have seen is that most of the members of the group are not making money with their trading. They exchange stories consistently about their own trading methods and the fact frequently is that their trading methods are ineffective. Why would you want to learn ineffective trading methods from people who are not making money trading? Isn't it better to speak with and discuss trades and strategies with someone who is making money? At many of the trading groups, guest speakers are regularly invited. Unfortunately, though these speakers may provide some positive knowledge, it is clear that they have a personal agenda. They normally are selling something. It may be software or a book, or some proprietary information that they contend will make the trader rich. Sometimes the trading group leaders are profiting by obtaining some percentage of the sales. I believe that those members of such trading groups need to be aware of the agenda and listen, but take what is said with a grain of salt.
As you undoubtedly know, I am a great believer in traders educating themselves and investment clubs and trading groups do provide some education to the trader. I merely suggest caution when engaging with any of these groups, because of (1) the frequent lack of success, and (2) the agenda presented by the various speakers and presenters at the groups.
Good Trading!
Bill Kraft
Mr. Kraft's past articles are posted on our website for your review.
-- by the Dividend Investor Team
