How to Start an Investment Club

in Social

Do you want to take the plunge into individual stock investing but cringe at the thought of going it alone? Then starting or joining an investment club may be the route to go since investing as a club member allows you to spread out the risk while expanding your knowledge by teaming with people who have similar investment goals in mind. Investment clubs are about getting people together who want to take their finances into their own hands, share research, build portfolios of individual stocks, track the results and share the rewards of sound investing strategy.

According to some sources investment club members jointly hold more than $175 billion of equities in their club portfolios, a sum that rivals the largest mutual funds, and without their management fees.

10 Steps to Start an Investment Club

  1. Find out the laws: Laws can vary state by state. Federal laws that may affect your club is the Securities Act of 1933, and Investment Company Act of 1940. For example, very large investment groups (100+) or groups with any member has more than 25 million in assets the group must register with the SEC. Look up the laws before you put things into place to avoid audits or legal trouble.
  2. Find members: Most clubs are made up of about 5-15 people. Talk to friends, family, and co-workers. You might want to post flyers around your school, church, or places you usually go hopefully attracting people with similar interests.
  3. Get help by the NAIC: the National Association of Investors Corporation (NAIC) has been providing services and advice for individual investors and Investment Clubs for over 50 years. More than 15000 clubs are signed up with the NAIC. They set out guidelines for successful Investment Clubs, offer manuals and accounting software and other beneficial materials.
  4. Pick a name: Make it official. This can be a fun part of the process especially if members have something in common. You can get as creative or as specific as you like, but it’s important to have a group name as a symbol of teamwork and membership.
  5. Draw up an agreement: As with any club you will need to establish the rules, like a meeting time, place, format, and length. Include the required amount of investment which can be anywhere from $10 – $100+ and when installments are due. It’s also important to decide what to do if one leaves the group.
  6. Elect officers and positions: Who will be the President, Vice President, Secretary, etc? Who will collect dues? Keep accounting and financial forms? Oversee meetings? Keep a list of all the officials and their role in the club. You may want to include this information in the agreement as well.
  7. Do you want to employ a broker? This will depend on the expertise of your members. Some clubs choose to use a broker to help them make decisions on how to invest their money. If you choose to invest with the broker it can be a risky but also very educational experience.
  8. Research, Research, Research: Seek out information from reputable websites such as Motley Fool and Yahoo! Finance. Go to the library, and get all your members to the same to make sure your decisions make sense and cents.
  9. Consider guest speakers and educational activities: Learning is an intangible asset of a successful investment club. Most clubs aren’t about just making money — they are about making its members smarter about their money. Maybe the group will take occasional “field trips” to seminars, or other finance-related programs. Members may also research different topics and present them to the group once a month or so.
  10. Have fun! What isn’t fun about getting a bunch of people together to increase your savings account?

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