For many people, understanding enough about stocks to feel comfortable about investing without a stock broker can be a real challenge. To overcome those uncomfortable feelings, people can join or start an Investment Club.
Investment Clubs consist of individuals that want to learn about investing, seek to limit their financial risk by pooling money with others and take ownership for some of their wealth building activities.
In a successful Investment Club each member of the club focuses on researching individual stocks for the group –– not just investing in the market. Electing an educational officer and seeking out guest speakers to invite to club meetings are critical to the knowledge club members must obtain.
To start a successful Investment Club:
- Talk with individuals who might want to learn and invest in the market. Club size should be under 30 members.
- Choose a name. At some point, the group might want a website to communicate with each other, so keep the name web friendly.
- Establish a firm monthly investment amount per member ($20, $30, $40, $50), and set meeting dates.
- Develop an agreement that will govern the club legally and operationally. Partnership agreements are generally formed. This is important if member leave the club or no longer can contribute due to job relocation.
- Elect Officers – President, Vice, Secretary, Treasurer, Educational Officer.
- File for an Employer Identification Number (EIN). You will need this number before setting up an account.
- Research brokerage houses to handle trades. Discuss fees before you make a final choice.
- Review the Securities and Exchange Commission rules for when an investment club has to register with their agency.
- Look at the products club members buy. In most cases, if you love the products research the company’s stock.
- Avoid getting all your investment information from cyberspace blogs. Use a brokerage house research department when the club has doubts about a stock.
Stocks never go up in price by accident. There has to be large buying demand, typically by big institutional investors such as mutual and pension funds. It is helpful to know what stocks the better mutual and pension funds are buying and selling. Following the patterns of the best funds can result in above average profits for your investment club.
Meaningful help exist for those willing to start or join an Investment Club. Since, 1951,
The National Association of Investors Corporation (NAIC), has set forth guidelines for investment clubs and offers it’s members practical investment education, and an online member community. NAIC has helped investment clubs build wealth through local, regional and national learning events, as well as web-based tools, software, and publications.
You should forget about tossing loose coins into a jar or cup every day. Let those coins work for you by forming or joining an investment club. Adding loose change with a few dollar bills every month to invest in stocks can be a rewarding financial experience.