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The beginning of change in any aspect of one’s life, is realizing the power that one has to create it. However, for significant change to be realized, we cannot operate as individuals. It is the collective power of grouped individuals that can bring about disruptive victories. As the famous basketball player Michael Jordan once said:
Talent wins games, but teamwork and intelligence wins championships.
No better group of millennials represent this truth like the founders of the Social Investment and Trade club, otherwise known as SIT. Meet Lazola Belle, the founder of this powerful investment club that will soon change the way we see the power of collective savings forever.
Tell us a bit about the Social Investment and Trade (SIT) club, the aim of your organization, and how this idea came about?
The incident that sparked it more than 3 years a go was a call from a friend of mine. He asked me for money to take his daughter to the doctor. And I didn’t have that amount of money at the time. I then asked myself, why couldn’t afford this basic amount of money to lend to a friend. After all, I had been working for 7 years at that time. So I called other people to ask if they had money to lend to this friend of mine. And most of them said no. Then I realized that there’s something wrong in the equation of our lives.
Here are a group of people who are economically active. We can acquire things, build credit, and drive German cars. Yet we couldn’t afford money for a sick child.I knew that something has to change.
The combined savings scheme known as a stokvel in South Africa, which has proven to have quite an impact, then came to my mind. I did my research I found that the combined savings scheme industry is worth $1 billion in South Africa alone. I couldn’t not be part of it. The challenge then was formulating one with a group of peers that would cultivate the right kind of conversations, which would ultimately lead to progressive investment initiatives. One where we knew would not generate direct economic benefits for us immediately, but would serve as a legacy of wealth for future generations.
Did any of you guys have a financial background in your respective careers?
None of us had a financial background from a career point of view. That was part of the challenge. When we don’t know, who can we ask, especially in a language that we can understand. We had to challenge ourselves to create that for ourselves. It worked out much better because it gave us a better understanding of financial concepts beyond the textbook.
You guys are millennials and our generation is known for being more hands on with our investing, rather than solely relying on financial advisers. Would you say you guys are the stereotype in that regard?
Yes we definitely are the stereotype. We specifically wanted to be hands on about our own investment decisions.
Many millennials don’t know enough about money. And we don’t bother to ask questions. Unfortunately this gives us no control.
However you can’t completely blame us because the challenge we have as millennials is that we don’t even know where to find credible information. There exists a considerable number of advisers who do not act in our best interests and are just salesmen for financial products.
Realizing how money ultimately flows through the market, we wanted to gain the knowledge of financially analyzing companies ourselves. This means as millennials, we had to get over our fear of the market. I’ll admit that it is difficult to start from scratch in the hope of building something.
But we cannot get economic or financial freedom if we do not understand how investments really work.
I remember having a conversation with a guy who asked us why we wouldn’t just give our money over to an asset management company. I asked myself, why can we not just be our own asset management company in our own capacity? We can’t truly build generational wealth if we don’t own a stake in the sector.
What kind of investments are you guys currently into and how do you come to a consensus about your investment portfolio?
We have raging debates before we reach a consensus. Because we have a democratic environment in our group, and we are growing.
Initially we didn’t know where to start investing, or how to structure our portfolio. Most of us had the basic knowledge that one of the simpler ways of engaging the market is to start buying exchange traded funds which are index trackers. They offer cheap entry into the market and due to their diversified nature, they offer mitigated risk. They are also quite passive, so you don’t have to know too much in order to participate. So for the first year, we just bought that. Eventually we had about $20,000 in the fund.
Our agreement was that during the first year of investing in ETFs, we simultaneously educate ourselves about other investment options so we can have a intelligent discussion about how to diversify later. We have since diversified into other investment classes. The one we are most proud of is funding small businesses that are overlooked by banks.
We have funded about 6 or 7 small businesses. About 5 of those have failed. But we’re still proud of this because we understand that the success of businesses ultimately comes through trying and testing.
How much has the fund grown over the years and what’s been the biggest challenge in achieving that growth?
Right now we are sitting at about $40,000. We started with $1000 on December 2013. The growth has been both through contributions from the members and market returns.
However, the biggest returns for us has been non-financial. We’ve seen a complete change in mindset on money and investments. We’ve also changed our relationship with time and delaying gratification. We now know that it should take a minimum of 10 years to see significant growth and returns. This was hard at the beginning because everyone wanted returns within a 12 month cycle. The development of the mentality that we are in this for the long run is by far the biggest growth we’ve attained.
Because once we bought into the vision that we are investing into something that is bigger than ourselves, the financial gains began to follow.
With regards to the challenges, the biggest we’ve had was having discussions around the organizational structure of SIT other than investing the money. Seeing money grow is exciting. However the more important conversations should center around figuring out how we build this thing to a point where we can actually employ someone to run the fund full time. So it’s not a part-time venture, because that slows things down. Having a formally drafted constitution by a lawyer has helped us navigate around challenges such as these.
How did you guys break the barriers of trust that come with grouping your savings together? And what systems do you believe are instrumental in maintaining trust, transparency and accountability in your organization?
Because we started as a group of friends, the trust from a friendship point of view was already there. We then started finding ways of making sure that we have a system of accountability beyond the friendship. So we can later open up the fund to people who aren’t our friends. The constitution we drafted covers all of the aspects around transparency, accountability and the repercussions of misconduct to detail.
If someone wanted to start their own social investment club today, from any part of the world, what advice would you give them in doing so and in being successful at that?
Just start. Set a target date and just get started. Also make sure that you get a constitution that will help you settle disputes and maintain accountability from the get-go. Lastly, Google is your friend.
What does the future look like for SIT, where do you see it in the next 10 years?
In the next 10 years we want to establish ourselves into a cooperative bank worth about $10 million. We’re thinking big.
Lastly what is the best piece of advice regarding money that you have ever received, and who was it from?
It wasn’t from a person. But rather from an observation. A combined savings scheme or stokvel and an investment club are fundamentally the same, but psychologically different. In one instance you have people coming together because they are desperate. In the other instance you have people coming together due to abundance. And that immediately dictates the tone of the vehicle you are building. When you look at money, you must not look at it from a desperate mindset. You must look at it from an abundance mindset. Even if you don’t have it physically.
You cannot grow money with a mindset of desperation. You grow it through thinking in abundance.
As a result a stokvel depletes every 12 months and does not gain momentum. Whereas an investment club understands that growth and money are a function of time. So the money remains invested for decades.