Investment clubs are gaining in popularity from the concept that there is power in numbers. Groups coming together with small amounts of money and leveraging their monies to buy power in stocks and bonds.
Pooling monies together creates an opportunity to invest when you normally wouldn’t buy on your own.
Small amounts of money get you in the game, therefore, take advantage of opportunities because it just may be the winning ticket that you need.
Tips to consider
- Join or create a group of interested people. Discuss the goals and expectations, making sure that they’re comfortable. Do not actually form the club until you’re sure you’re committed to it.
- Agree on the amount of the monthly contributions per person. Choose a name for your club, elect officials and file for a Tax Identification Number via IRS form SS-4 (which you can download from the IRS website).
- Draft partnership agreement bylaws. Open a brokerage account. (Alternatively, you might create a less formal club that learns and researches together but stops short of investing actual money together.)
- If learning about investing is one of your club’s goals, you might elect an education officer to organize lessons for the group. Members can each read a book or an article on investing or business and then report back to the group. One member might learn how to calculate some stock valuation ratios and then teach the fellow club members. You can all go on a field trip to a local company or stock exchange. Or visit a local library together and ask the librarian to show you some useful reference materials, such as Value Line stock reports. Consider inviting some guest speakers as well, such as a veteran investor, a member of a more experienced investment club, or someone who works in an industry you’re thinking of investing in. These activities help keep interested high among the members.
- Research stocks, studying companies’ financial statements, competitive positioning, and business strategy. Just about all the information that you need to evaluate a company is available online. Being able to take care of some business online between meetings can help make your face-to-face time more productive.
- There are a few perils you’ll want to avoid:
- Don’t under-delegate. Each member should be an active participant.
- Don’t be impatient. Focus on the long-term rewards.
- Don’t be “all business.” have fun, offer refreshments, and socialize– perhaps even with another club.