Could Harry make your day?

WHEELING AND dealing in stocks and shares is no longer the preserve of City slickers in the Square Mile, thanks to the growth of investment clubs. Ordinary people are getting together in pubs and social clubs to give the professionals a run for their money. We went to Leigh-on-Sea, Essex, to sit in on the first meeting of a typical investment club:

The landlord of the Harry, a former restaurant-turned- pub in Leigh- on-Sea, the posher part of Southend, rang the bell for last orders at 10.50pm sharp, just as Mark Goodson closed the first meeting of the Dirty Harry Investment Club around a table in the pub's games room. In a little under two and half hours the 16 men and one woman present had run the rule over 22 potential investments. They had taken the unanimous decision to stake the whole pounds 10,000 the 20-strong membership had subscribed on a portfolio of six shares.

Similar scenes are being repeated by the thousand across the UK. Investment clubs formed by groups of up to 20 people to pool their money, knowledge and contacts have never been so popular. Tiffany Hardie-Evans, a spokeswoman for ProShare, says the number of active clubs has risen from 350 to more than 5,000 in the past two years.

Mark Goodson, a probate lawyer in a local solicitor's office, is a veteran, having set up three clubs. These include STIC, which meets twice a year, once in September to invest the cash and once in May to share the loot. He doesn't charge for his services, but he hopes won't end up poorer.

Mr Goodson's own early investments included Millwall FC and Sycamore Holdings, neither of which was a great success. More happily, his first investment club, H&G (after the Horse & Groom in nearby Rochford) won the 1998 ProShare Achievement trophy and a pounds 1,500 prize. Mark's latest club contains old hands and novices, who are friends of friends Mark's and fancied a monthly trip to the pub, a couple of pints or three and a game of investment as a change from bar billiards and table football. The landlord, who already sponsors a team to wear the pub's logo in the local soccer league, is happy to give them free use of the room once a month on a Wednesday night.

At 8.30pm Mark calls the meeting to order and outlines the simple rules. Each member puts in pounds 500 and agrees to subscribe a further pounds 30 a month for the next five years. He calls on Tracy, who works as advertising manager for Shares, a new magazine dedicated to share tips with a strong Internet bias, to kick off the meeting.

She likes Trafficmaster, which is to launch an updated version of its in-car electronic guide to avoid traffic jams, and Weir Group, the Scottish engineers. Mark gently tells the meeting they should be looking at hi- tech and telecoms stocks if they want real growth.

He calls on John, a retired local government officer who "spends 28 hours a day" on his hobby of stock market investment, to run the rule over ARM Holdings. John describes ARM as a hi-tech company which makes its money out of joint licensing deals rather than royalties. ARM's shares have doubled in a month and "could go up a further 100 or even 150 per cent if they break into the FTSE 100 index". Barry, a quantity surveyor, is worried about ARM getting out of actual manufacturing.

Bill, who works at Lloyd's of London and is new to the investment club scene, wonders if they are too dependent on mobile phones in view of the latest scare stories.

No-one is quite sure but John and Mark are reassuring. Mark nominates Vodafone as an "oggy" or "obviously good investment" in spite of the uncertainty caused by the British company's recent hostile bid for Mannesman, the German phone and engineering giant.

Mark also likes Pace Microtech, which has been tipped in Tracy's mag, then passes the baton back to John to talk through Kingston Telecoms. "Access to the Internet through the telly - it's got to be the future," says Mark. "The world's their oyster."

He assesses BATM, an Israeli company big in photonics, the use of fibre- optics instead of copper cable to increase the carrying capacity of electronic circuits. Sean, a quantity surveyor who works in the Barbican in London, is worried it might compete head-on with ARM, but Mark says there is no risk of competition.

Next up is Baltimore Technology, an Internet supplier which is seeking a listing on Nasdaq, the US stock market for hi-tech shares. Baltimore's losses will double next year. But the shares have risen from pounds 2 to pounds 22, says Mark.

It's getting close to closing time and the pace quickens. The club discusses Redstone Telecoms and AIM Trust. SCI Entertainment's proposed deal with Ronnie Biggs to make a game based on the Great Train Robbery gets the thumbs down for unethical activity.

Barry has shares in AIT Group, the software and computer service provider which was discussed at ProShare's summer seminar Barry and John attended. Cautious Bill wonders if Alliance & Leicester might be worth considering once the recently ousted chief executive Peter White has been replaced, but the mood is all in favour of growth prospects and A&L doesn't get on the voting sheet.

It's now 10.20pm and decision time. How much will they invest? And how?

John's proposal to invest the lot right away easily wins the day. Everyone has five votes in a secret ballot. The result gives ARM Holdings 15 votes, NXT nine, Kingston eight, Infobank and BATM seven apiece and Vodafone six.

Mark wants to put half the cash into ARM and pounds 1,000 each in the other five, but David, a retired director of Emess Lighting, proposes they put pounds 2,000 in ARM and pounds 1,500 each in the others. David's caution gets the nod.

The club did not set out to build a specialised, high-risk IT portfolio but for better or worse that's the way it has turned out. There is just time for a final round of drinks, in which Adnams beats Guinness by five votes to four, followed by miscellaneous lagers, two orange juices, a Coke and an exotic cocktail.

investment clubs - your questions answered

INVESTMENT CLUBS are an easy and relaxed way to learn about investing in the stockmarket. They began in the US and caught on here, where there are now more than 5,000 clubs, half of them less than two years old.

Millions of people became shareholders for the first time in the 1980s through the big privatisations of outfits such as BT and British Gas, but not many went on to learn about active investing. Clubs have given them an opportunity to learn, have some fun and even make money - if they choose investments carefully.

So how do investment clubs work?

Setting one up does not require much money. A group of friends will pool a small amount every month, typically between pounds 25 and pounds 50 each (some people put in as little at pounds 10 a month, but whatever the amount, it should always be money you won't need for at least five years). After a discussion, when everyone gets a chance to express an opinion, a simple majority vote is taken on which shares to buy and sell. Then a stockbroker is appointed who will perform your transactions.

The quickest way to find out more is to contact ProShare, the organisation which promotes wider share ownership. Questions people often ask ProShare include:

Q: Is there a legal restriction on the number of people in any single investment club?

A: Although there is no minimum, it is recommended five or more should form an investment club. The maximum is 20.

Q: What sort of people form the clubs?

A: Anyone over 18, from any walk of life.

Q: How much money does an investment club need before it starts investing?

A: This is part of the fun. The members must decide when they should make their first purchase of shares. As a guide, perhaps pounds 500 is required for the first investment, although you could certainly get started with less.

Q: What happens if an individual wishes to leave an investment club?

A: The procedure for this will be covered by the rules of the club.

Q: Shouldn't clubs wait until they have sufficient funds to invest in, say, five stocks before making any investments?

A: In a perfect world, yes - but the reality is that the members will be itching to get going. Just make sure your initial purchases are well researched and "safe". Don't be tempted by get-rich-quick tips. Build a strong base to your portfolio before you decide to speculate. This might involve purchasing shares in several "blue chip" companies, ie those companies which are large, relatively stable and probably household names, before buying more "sporty" investments.

Q: Can a club member abscond with the pooled funds?

A: To date, it hasn't happened, as far as we know. But if your club strictly follows the rules laid down in the manual and conforms to all the requirements of its stockbroker agreement, excellent safeguards will be in place.

Q: How does an investment club register its investments?

A: The two main methods are via club trustees or a nominee company operated by the club stockbroker.

Q: How do individuals declare their investments to the Inland Revenue?

A: ProShare's manual provides the necessary Inland Revenue forms.

Q: Can an ISA be run through an investment club?

A: No, these schemes apply only to individual savings plans.

Q: Do I have to know a lot about the stockmarket before joining or starting up an investment club?

A: No. Many people join investment clubs to learn from others. Obviously it is a help to have a nucleus of members who understand the basics, but a considerable amount of guidance is available from the manual and through other investment clubs.

Q: Do I need a lot of money?

A: It is important that each club sets its subscription level in accordance with the wishes of members. Some operate on as little as pounds 10 a month. Some might decide to set an initial lump sum of maybe pounds 100 to make its first investment quickly, then a monthly subscription of pounds 25 per member per month. It is up to the individual club. Some clubs allow different members to pay differing amounts each month according to their means and this is not a problem if the treasurer is happy with the slight increase in his workload.

Q: I already invest in the stockmarket. What are the advantages of joining an investment club?

A: Many members of investment clubs have private portfolios - one does not exclude the other - and they believe club membership makes them better investors by increasing their contacts and their "Circle of Competence".

For more information, ProShare provides a comprehensive manual which details how to set up and run an investment club. This usually costs pounds 29.50 but Independent readers can buy one for pounds 20, including postage.

ProShare: 0171-394 5200, or on the Internet at www.proshare.org.uk