1. Investment Clubs - An investment club is simply a group of people who share an interest in the stock market pooling their resources into one large investment.  Investment clubs are long-term commitments. They are a wonderful way to get to know the stock market, have a good time, and, over time, earn some profits. But making money should not be your only reason to join an investment club – since investing is always, even in a shared setting, a risky venture.

2. Myths & Realities - Unfortunately, it’s often difficult to join an established investment club. Many of them have been operating for years, even decades, with the same members and they aren’t likely to grow. Which leaves many hopeful club members with the option of starting their own club. This is a great option, but it should be considered carefully. Make sure that you fully understand what needs to happen for your club to be successful, and be sure you are starting for the right reasons. Here are a few points you might want to consider:

3. The Benefits - Since we have considered the realities of investment clubs, let’s take a moment to consider the benefits of them. There are also various personal and group benefits to being part a club. They range from the strength of combined investment dollars to the club being a way to build confidence.

The first benefit I would like to consider here is the ability to take advantage of combined investment knowledge.  When you work with a group of people who have a similar interest in the stock market you’ll have a large amount of combined knowledge working in your favor.

4. The Risks - While being part of an investment club will build your confidence with the stock market and work to reduce your personal risk, there is no way to make investing completely safe, or stock markets easy to understand. With unpredictable swings in prices, bull and bear phases, and stories about people making and losing millions overnight, stock markets can be an intimidating to a beginning investor.

5. The Rewards - Need more reasons to consider joining or starting an investment club? Consider these:

You have the chance for much better results and profits than when you invest your money in annuity savings or into the bank.  Your money will also be much more liquid, allowing you to take advantage of more profit making opportunities.  You’ll have more control over where your money goes, what you do with it, and how much of it you want to invest, and where.

6. Guidelines - No matter why a group starts, whether it is simply for entertainment or for a more structured purpose like investing money, there are is one law that doesn’t change. A structure must be put in place, or not much happens. An investment club is no different. For an investment club to be successful there are several features that need to be in place for the club to run smoothly. 

7. Finding Members - So you’ve weighed the risks and rewards, considered the benefits and seriously thought about your ability to work with a group to manage your investments, and you come to the conclusion that an investment club is right for you. Congratulations! Unfortunately, there are no investment clubs around that are just right for you to join. Consider this an opportunity.  With a few like-minded people, you can start your own investment club. Here are a few ways to find those people.

8. First Meeting - When you meet for the first time there are several things that you’ll need to discuss.  Make sure everyone has the opportunity to contribute to the meeting so that all opinions are taken into account.  The following general principles should all be covered in the first meeting:

Discuss the exact details of how the club is going to be run.  At this time you can talk about the goals of your club administration and how you plan to achieve this organization.

9. Second Meeting - You’ve met once, determined how often the club is going to meet, how many members there are, and even thought about a name. But your new investment club isn’t quite ready to make its first stock purchase yet. There are few things that have to happen, including the election of club officers, before you can settle down with a list of interesting stocks to study.

10. The Details - With your officers in place club members may feel that they are ready to start their investment journey, but there are a few legal and financial details that need to be settled before they can purchase their first stock. First off, your investment club will need to decide what type of business entity it is.  Clubs can be corporations, general partnerships, or limited liability partnerships.  Each of these business models has their own advantages and disadvantages.

11. Your Mission - You’ll also want to come up with an appropriate mission statement for your investment club.

This isn’t something that you need to do right away, but within a few months of your start up the club should have one in place.  

Your mission statement should state, in two or three sentences, the reason your club was formed and what it hopes to accomplish.

12. Find a Broker - After these business details are settled, your club can consider its next major decision. Finding a Broker. Every investment club needs to work with a broker. No one member of the club is going to be able to provide the constant watch on the markets that is necessary to provide up-to-date information on the stocks that your club may be considering. However, it’s a good idea to investigate several brokers, of different types and have the club meet to discuss the various options before making any decisions.

13. Discount Brokers - There are a few things that you should keep in mind when you’re looking for a discount broker, such as what sort of customer service the broker offers, what fees they charge, and whether they offer any other incentives to hire them. You’ll be able to see many discount brokers offering you their services both locally and on the Internet. 

14. Your Club - With a Broker lined up for the club to work with, the club can now purchase its first stock. But which stock should that be? Fortunately, investment clubs are as much about learning about the ins and outs of investing as they are about delivering profits. Yet without a clear education program in place, a club can find itself dabbling in various areas of the Stock Market without ever creating a real sense of understanding of it with your members.

15. Internet Resources - National Association of Investors Corporation (NAIC)
This site has a wealth of information about investing in general and about investment clubs. It’s a good site to start with.
http://www.better-investing.org/             

US Securities and Exchange Commission (SEC)
This website has good basic information about investment club regulations.
Securities and Exchange Commission
Office of Investor Education and Assistance
450 Fifth Street, N.W.
Washington, D.C. 20549-0213
http://www.sec.gov/investor/pubs/invclub.htm

16. Club Tools - As with all aspects of investing there are a number of tools, such as software programs, and other pieces of information that can make running your investment club smoother. Consider having several of the members of your investment club try different types of software on their computers so that the club can make an informed decision about where it wants to invest.

17. A Final Word - Investing in the Stock Market is a challenging and rewarding way to manage your financial resources, but it can be an intimidating experience. An investment club is the perfect way to reap the rewards of investing, without any of the difficulties that solitary investors often run into.

In a club, you will be pooling your financial resources and knowledge with others who have the same goals as you do. As group you will learn more about the Stock Market, and earn greater profits than you ever could by yourself.

THE END