Chamas that build wealth

Why you need to join a Chama

The  biggest risk of all is not taking any.”   

Melly Hobson

Investment groups are a good avenue to diversify and grow your wealth. Most of us refer to investment groups as Chamas. The kind of investment group we are discussing today is one where members come together with the commitment to grow themselves through saving and investing. Eventually, their investments grow to where they may only be called upon to contribute to special projects.  Chamas, if run well can be a great tool to build the wealth of members. Let’s delve into some of the reasons why you should join or form an investment group or club

1. Pooling of resources

Investment group members will usually make monthly contributions of an agreed amount. This money is the capital needed to start and grow investments for the team. As the monthly contributions continue coming in the club can grow its investment portfolio. The group is then able to meet its investment targets much faster than if each member invested alone.

2. Exchange of ideas from diverse membership

Effective groups will have anywhere from five members onwards. The members will ordinarily have different thoughts and ideas on what to invest in and where to invest. The exchange of ideas on what would be the best-suited investments for the group usually serves to grow not only the group but also the individuals who are in the group. This is because while some of the ideas may not be taken up at the investment group level, they can be adopted by individuals who can make a success out of them. The investment groups are such profound melting pots of ideas.

3. Diverse Investment portfolio

When members come together, they take advantage of individual strength and experience. This leveraging will give them an edge, especially if they have different backgrounds. So in choosing membership of an investment group, it is a big plus to choose members who have diverse backgrounds, they will bring in rich ideas that can be taken up and become profitable to the chamas.

Because of the capital muscle that chamas have, it is sometimes a good idea to diversify investments in various sectors of the economy as well as invest in other countries. This requires in-depth research and testing to minimize risk and exposure, but it can easily be done, within the context of investment clubs.

4. Social growth and increased networks

The more diverse an investment group is in terms of gender, age, professions, etc, the more its members stand to benefit from different views as well as broadening networks. Members can draw from each other’s strengths and networks. These networks are not only good for financial growth but social development.  when you spend quite a bit of time together, naturally you bond beyond the initial financial issues that brought you together.

Members keep in touch on how each of them and their families are faring, there is an exchange of hacks and ideas for overcoming struggles and celebrating each other’s successes. Where members share finance-related networks, the networks serve to shorten learning curves, because as an individual you tap from the experience of a member and avoid pitfalls down the road. Chamas are a great idea for broadening an individual’s horizons.

5. Accelerated financial growth and wealth building

The consolidation of contributions from members to make investments possibly means that what would have taken you a year or more to save up for as an individual will be achieved in a much shorter period, in an investment group. This accelerated access to capital allows the group to invest more and equally get higher returns much faster means as a group. The members of the group can grow in leaps and bounds much faster in comparison to if each individual decided to save and invest on their own.

Effective Chamas

6. Balance of risk in the investment portfolios

The dynamics of the investment groups is that individuals will have their risk appetite. In fact, I guarantee you will find members fall within the full spectrum between risk-averse and those with a huge appetite for risk. This is generally a good thing if members are willing to listen to each other. Each investment should be considered on its own merit before the money is put in. The advantage for the individual is those who are very risk-averse stand to benefit from investing where they would not have invested by themselves, as they would consider it too risky. And vice versa in the case of those who love investing in only high-risk ventures.

7. A good system of accountability and timely investment

There is nothing as good as the pressure you receive from your chama mates especially when you are late in paying your monthly contribution. That pressure…. Is real and not in a bad way because it forces you every month to prioritize what is going to your savings in the Chama. Some of us, only thrive under such pressures. Nobody wants to be the last to send their contribution plus if there are applicable fines, it gets even more interesting. This ensures that the funds are received and invested on time. This discipline is sometimes hard for individuals on their own especially if they suffer from procrastination.

8. For consolidating wealth and retirement planning

As individuals, we tend to start good ventures but abandon them along the way. You buy land hoping to develop it, but you never quite get enough capital to construct or invest in it. You start your side hustle business, but you soon shut it down because it was run down by employees, or you are a business owner, but you just can’t seem to scale up fast enough. 

An investment club can help you narrow down what you focus on. Well-run investment groups have the potential to create abundant wealth for their members and set them up for retirement. It is a matter of having a good investment strategy with very committed members.

9. Diversification of investment risk for individuals

In investment, it is wise to diversify your investment portfolio to cushion against market disruptions. Chamas are a great way for individual members to diversify their own risks in investing. Because while chamas can go big in certain investments the risk or exposure for the individuals is mostly limited to their portion of the contribution.

Chamas have been around for a while and most people in my circle have been or are in one with varying degrees of success. I strongly believe that it is possible to create immense wealth for the chama members provided the group, has a good legal foundation, has a good investment strategy, and has committed members without necessarily being involved in its day-to-day running. Unity of purpose is key. In my view for such chamas, the sky can only be the beginning for them.

So, what’s your chama story?

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