Investment Clubs

Investment clubs exist as a group of people who share an interest in the stock market and who pool their resources into one large investment. Many investors are on there own and may not have enough money to invest individually into the stock market, so they opt to join or create a club based on the principle that there is strength in numbers.

Investment clubs are a wonderful way to get to know the stock market, make friends, and over time receive a return on investment.  Unfortunately, it is very difficult to join an established club since many of them have been operating for years with the same members. These investment clubs are not likely to grow in membership if they have been operating successfully over time.  This leaves many investors with the only option of creating their own stock market investing club. If you are interested in creating your own club keep in mind that it can take a significant amount of your time and a lot of work to get it up and running.  Below I discuss some factors to take into consideration if you are interested in the undertaking required to create investment clubs.

First of all, you should be sure that participating in investment clubs is right for you personally. If you have never been a member of a club, you may not know the answer to this. Some things to take into consideration may include the fact that you may not always get your way.  Can you handle a democratic forum? Also, are you willing to be an amateur?  Just because you start a club doesn’t mean you will become an expert in playing the stock Market overnight. The purpose of investment clubs are to provide a safe learning environment and one that is an ideal atmosphere for beginner investing.  Lastly, are you being realistic?  If you think the only purpose for starting investment clubs is to make a large profit quickly, then you are sadly mistaken.  Not saying that overtime you won’t make a large profit, but there are no guarantees and the level of success depends on many factors.

Still interested in starting one of your own investment clubs? Great!  Below are a few tips to assist in the successful launch of your club.

  • Before investment clubs are formed you must be sure that you have investigated the status under federal, state, and local laws.  It will vary from state to state so you want to be sure that you are compliant.
  • Find compatible members to form your club. You want to have few enough that you don’t have too many schedules to balance and big enough that you allow enough capital to invest so that you actually make money investing in stock. You also want to be sure that your fellow investors share a similar investment philosophy.
  • When creating investment clubs, you also want to be sure that the position of replacements for members who have dropped out, or for newcomers to the club are clearly defined. For example, should the new member be expected to match the total investment of the member he or she is replacing?
  • Determine common goals for the group and decide how much money the club will invest on a monthly basis. This will be a part of determining your clubs investing strategy.
  • Open a bank or brokerage account after you have filled out a Limited Partnership form. (If that is what you choose). Many investors see this as the easiest way to start a business and create investment clubs.

Investment clubs work out great for investors for many reasons. They are a great place to learn how to invest and to learn how to avoid making investing mistakes. You can learn the investment basics and work with members of your group in determining and learning new investment strategies

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